BHANUSHALI HSG. COOP. SOCIETY LTD. Vs. MANGILAL & ORS.

Supreme Court of India (Full Bench (FB)- Three Judge)

Appeal (Civil), 5704 of 2015, Judgment Date: Jul 24, 2015

The short question that arises for consideration in  this  appeal,  by
special leave, is whether a dispute arising out of a contract for  sale  and
purchase of immovable property owned by  the  respondents  was  amenable  to
adjudication under Section 64 of the M.P. Cooperative Societies  Act,  1960.

REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.5704 OF 2015
(Arising out of SLP (C) No.36497of 2012)

Bhanushali Housing Cooperative Society Ltd. …Appellant

Vs.
Mangilal & Ors. …Respondents

J U D G M E N T
T.S. THAKUR, J.
Leave granted.
1. The short question that arises for consideration in this appeal, by
special leave, is whether a dispute arising out of a contract for sale and
purchase of immovable property owned by the respondents was amenable to
adjudication under Section 64 of the M.P. Cooperative Societies Act, 1960.
By his order dated 1st March, 2004, the Deputy Registrar, Co-operative
Societies, Ujjain, before whom the proceedings were initiated, answered
that question in the affirmative and decreed specific performance of the
contract entered into between the parties. A first appeal preferred by the
sellers (respondents-herein) before the Joint Registrar Ujjain failed and
was dismissed by his order dated 7th August, 2009. Aggrieved by the said
two orders, the respondents preferred a second appeal before the M.P. State
Co-operative Tribunal, Bhopal who allowed the same and set aside the orders
passed by the Deputy Registrar and that passed by the Joint Registrar
holding that the dispute raised by the purchaser-society could not be made
the subject matter of proceeding under Section 64 of the M.P. Cooperative
Societies Act, 1960. The purchaser-society then filed writ petition
No.15195 of 2011 which was heard and dismissed by a Division Bench of the
High Court of Madhya Pradesh. The High Court concurred with the view taken
by the Tribunal that a dispute arising out of a contract of sale and
purchase of immovable property was beyond the purview of Section 64 of the
Act. The present appeal calls in the question the correctness of the said
judgments and orders.
2. Section 64 of the M.P. Cooperative Societies Act, 1960, may, at this
stage, be extracted in extenso :
“64. Disputes: - (1) Notwithstanding anything contained in any other law
for the time being in force, [any dispute touching the constitution,
management or business, or the liquidation of a society shall be referred
to the Registrar] by any of the parties to the dispute if the parties
thereto are among the following:-

(a) a society, its committee, any past committee, any past or present
officer, any past or present agent, any past or present servant or a
nominee, heirs or legal representatives of any deceased agent or deceased
servant of the society, or the liquidator of the society;

(b) a member, past member or a person claiming through a member, past
member or deceased member of a society or of a society which is a member of
the society;

(c) 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
and any person claiming through such a person.

(d) a surety of a member, past member of deceased member or a person other
than a member who has been granted a loan by the society, whether such a
surety is or is not a member of the society.

(e) any other society or the liquidator of such a society; and

(f) a creditor of a society.

(2) For the purpose of sub-section (1), a dispute shall include –

(i) a claim by a society for any debt or demand due to it from a member,
past member or the nominee, heir or legal representative of a deceased
member, whether such debt or demand be admitted or not;

(ii) a claim by a surety 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 a result of the default of the principal
debtor, whether such debt or demand be admitted or not;

(iii) a claim by a society for any loss caused to it by a member, past
member or deceased member, any officer, past officer or deceased officer,
any agent, past agent or deceased agent, or any servant, past servant or
deceased servant or its committee, past or present, whether such loss be
admitted or not;

(iv) a question regarding rights, etc., including tenancy rights between a
housing society and its tenants or members; and

(v) any dispute arising in connection with the election of any officer of
the society or of composite society;

Provided that the Registrar shall not entertain any dispute under this
clause during the period commencing from the announcement of the election
programmed till the declaration of the results.

(3) If any question arising whether a dispute referred to the Registrar is
a dispute, the decision thereon of the Registrar shall be final and shall
not be called in question in any court.”

3. A careful reading of the above would show that for a dispute to be
brought within the purview of Section 64 two essential requirements must be
satisfied viz. (i) that the dispute must “touch the constitution,
management or business of the society or must relate to the liquidation of
the co-operative society;” and (ii) that the dispute must be between
parties referred to in clauses ‘a to f’ of Section 64(1) (supra). It is
only when the twin requirements are in the facts and circumstances of a
given case satisfied that a dispute can be said to be amenable to
adjudication under Section 64. Failure of any one of the two requirements
would take the dispute beyond the said provision.
4. In the case at hand the dispute raised by the appellant-society
before the Deputy Registrar related to the alleged refusal of the
respondent to complete the sale transaction in terms of the agreement to
sell executed between the respondents and/or their predecessors-in-
interest, on the one hand, and the appellant-society on the other. The
nature of the dispute, therefore, did not obliviously touch the
constitution and management of the society nor did the dispute have
anything to do with the liquidation of the society. Whether or not the
dispute sought to be raised was a dispute “touching the business of the
society” is in that view one of the questions that needs to be examined.
5. As regards the second requirement viz. that the dispute must be
between the persons referred in clauses ‘a’ to ‘f’ of Section 64 of the
Act, it is common ground that the respondents-sellers were not members of
the society nor do they fall under anyone of the clauses ‘a’, ‘b’, ’d’ or
‘f’ enumerated under Section 64 (1). This would mean that the respondents
must answer the description of persons mentioned in clause (c) to Section
64(1) of the Act. The Tribunal as also the High Court have taken the view
that the respondents do not answer the description of parties falling
under Section 64 (1)(c). That is because the appellant-society had neither
granted any loan to the respondents or any one of them nor did the
respondents have any “business transactions” with the society. The
Tribunal and the High Court have interpreted the words “business
transactions” to mean a series of transactions in connection with the
business of the society. The expression did not, according to them,
postulate a single contract for sale or purchase of the property between
the society and a third party.
6. Two distinct questions that need to be answered by this Court,
therefore, are:
whether the dispute in the case at hand touches the business of the
appellant-society? and
whether the dispute sought to be raised arising as it is out of the
execution of a contract for sale of property by the respondent in favour of
the appellant-society constitutes “business transactions” within the
meaning of Section 64 (1)(c)?

Re: Question No.1:
7. The expression “business of the society” has not been defined in the
Act or elsewhere. The expression has fallen for interpretation of the
courts in the country with commendable frequency. Pronouncements from
different High Courts have even led to a cleavage in judicial opinion as to
the true meaning and scope of that expression appearing as it was in
Section 43(1) of the co-operative Societies Act, 1912 and later in
analogous provisions made in different State enactments. One line of
decision takes a liberal view of the expression “business of the Society”
while the other prefers a narrower interpretation. Both these were noticed
by this Court in Deccan Merchants Co-operative Bank Ltd. vs. M/s. Dalichand
Jugraj Jain and Ors. (AIR 1969 SC 1320). An elaborate discussion on the
subject led this Court to declare that the legislature had used the
expression “business of the society” in a narrower sense and approved the
view taken by the High Courts of Madras, Bombay and Kerala in preferences
to that taken by the High Courts of Madhya Pradesh and Nagpur. While saying
so, this Court enumerated five kinds of disputes mentioned in Section 91
(1) of the Maharashtra Co-operative Societies Act and observed:
“The question arises whether the dispute touching the assets of a society
would be a dispute touching the business of a society. 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 co-operative 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.
xxx xxx xxx
While we agree that the nature of business which a society does can be
ascertained from the objects of the society, it is difficult to subscribe
to the proposition that whatever the society does or is necessarily
required to do for the purpose of carrying out its objects can be said to
be part of its business. We, however, agree that the word ‘touching’ is
very wide and would include any matter which relates to or concerns the
business of a society, but we are doubtful whether the word ‘affects’
should also be used in defining the scope of the word ‘touching’. ”

8. Dealing in particular with the question whether a dispute touching
the assets of the society would be a dispute touching the business of the
society, this Court observed:

“18 .xxxxx xxxxx xxxxx

…... 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....”

9. The question was once again considered by this Court in O.N.
Bhatnagar vs. Smt. Rukibai Narsindas & Ors. (1982) 2 SCC 244 where this
Court referred to the decision in Deccan Merchant’s case (supra) and
observed:
“Thus, the Court adopted the narrower meaning given to the word “business”
as expressed by the Madras, Bombay and Kerala High Courts in preference to
the wide meaning given by the Madhya Pradesh and Nagpur High Courts.
According to the view taken in Deccan Merchants Cooperative Bank case the
word “business” in the context means “any trading or commercial or other
similar business activity of the Society”. It was held that the word
“business” in Section 91(1) of the Act has been used in a narrower sense
and that it means the actual trading, 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.”

10. On the facts of the case before it, this Court in Bhatnagar’s case
(supra) held that the act of initiating proceedings for removing an act of
trespass by a stranger from a flat allotted to one of its members could not
but be a part of its business. This Court held that it was as much the
concern of the society formed with the object of providing residential
accommodation to its members, which was normally its business, as it was of
the members to ensure that the flats are in occupation of its members in
accordance with the bye laws framed by it, rather than the occupation of a
person who had no subsisting reason to be in such occupation. The decision
in Deccan Merchant’s case (supra) was on facts held to be distinguishable
and resort to proceedings under Section 64 of the Act, held legally
permissible.
11. Reference may also be made to the decision of this Court in The Co-
operative Central Bank Ltd. and Ors. vs. The Additional Industrial
Tribunal, Andhra Pradesh and Ors. (1969) 2 SCC 43, wherein the question was
whether the expression business of the society appearing in Section 61 of
the Andhra Pradesh Co-operative Societies Act, 1964 covered a dispute in
respect of alteration of the conditions of service of an employee of the
society. The tribunal and the High Court had in that case taken the view
that such a dispute fell outside the purview of Section 61 of the Act.
Affirming that view this Court observed:
“In that case [Deccan Merchants case], this Court had to interpret section
91 of the Maharashtra Co-operative Societies Act, 1960. [Maharashtra Act 32
of 1961], the dispute related to alteration 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.
xxx xxx xxx
….. 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 carrying out its objects, such as 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
workmen employed by the society cannot be held to be a dispute touching the
business of the society.”
(emphasis supplied)

12. In the case at hand the objects of the appellant-society as set out
in the Articles of Association are as under:
“Objective of this society would be to make arrangement for the
construction of building, to purchase, sale, take on rent or rent out,
prepare land for construction of building and to make arrangement related
to social, educational and entertainment to its members and it would be
complete right to this society to carry out such work which will be
necessary and proper in its opinion. These rights shall mean and include to
purchase land, take land on lease, sale, exchange, mortgage, let out on
lease, sub-lease, to give resignation, or to accept resignation and to do
all other relative work and to sell the building on instalment on proper
and necessary restrictions, to give loan or guarantee of loan for
facilitating construction of building, to make repairing, and will include
other rights to carry out work related to it.”

13. Purchase of land for being used in the manner set out in the objects
extracted above is, therefore, one of the facets of the business that the
society undertakes. Such purchase is directly linked to the object of
developing the acquired land for allotment of house sites to the members of
the society. There is, therefore, a clear and discernible nexus between
acquisition/purchase of land and the object of providing house sites to the
members which under the circumstances happens to be the main business of
the society. It is not a case where the facts giving rise to the dispute
are not relatable to the objects of the society or where the connect
between the facts constituting the dispute and the objects of the society
is remote or their interplay remarkably tenuous or peripheral, as was the
position in Co-operative Central Bank Ltd.’s case (supra) involving
alteration of the conditions of service of the employees of the society. We
have in that view no hesitation in holding that the dispute arising out of
the purchase of the land owned by the respondents was, in the instant case,
a dispute touching the business of the appellant-society. Question No.1 is
answered accordingly.

Re: Question No.2:
14. The second essential requirement for a dispute to fall within the
purview of Section 64 is that the parties to the dispute must be those
enumerated in sub-clauses ‘a to f’ under Section 64 of the Act. Clause (a)
of Section 64(1) envisages disputes between a society, its committee, any
past committee, any past or present officer, any past or present agent, any
past or present servant or a nominee, heirs or legal representatives of any
deceased agent or deceased servant of the society, or the liquidator of the
society. This clause has obviously no application to the facts of the
present case. That is true even about clause ‘b’ whereunder the dispute
between a member, past member or a person claiming through a member, past
member or deceased member of a society or of a society which is a member of
the society is brought within the purview of Section 64. We shall presently
deal with clause ‘c’ to Section 64 (1) upon which counsel for the appellant-
society placed reliance but before we may do so we may deal with the
application of clauses (d), (e) and (f). Clause (d) of Section 64 (1)
envisages disputes involving a surety of a member, past member of the
society, member or a person other than a member who was appointed by the
society; whether or not such a society is a member of the society. So also
clauses (e) and (f) do not have any application to the case at hand as the
same deal with disputes between any other society, the liquidator of such a
society or creditor of a society.
15. That leaves us with clause (c) of Section 64 (1), which postulates
disputes between non-members to whom loans are granted by the society and
the society or disputes between the society or a non-member with whom the
society has or had “business transactions” or any person claiming under
such a society.
16. It was argued on behalf of the appellant-society that the dispute
between society, on the one hand, and the respondent, on the other, arising
out of the contract for sale and purchase of immovable property fell under
this clause inasmuch as the society was a party to the dispute arising out
of a transaction that constitutes a business transaction between the
society and the respondent non-members. The fact that the dispute related
to a single transaction did not, according to the learned counsel for the
appellant, make any material difference having regard to the provisions of
Section 5 of the M.P. General Clauses Act, 1957. That provision, it was
argued, made it clear that words in singular shall include the plural, and
vice-a-versa. This implied that a single business transaction could also
bring the dispute arising out of any such transaction within the purview of
Section 64.
17. On behalf of the respondents, it was contended that Section 64(1)(c)
had no application to the case at hand not only because a single
transaction did not constitute business but also because the legislature
had deliberately used the expression “business transactions” to make it
clear that it is only a series of transactions that would bring the dispute
arising out of such transactions within the purview of Section 64. The
scheme underlying Chapter VII of the Act that provides for settlement of
disputes clearly suggests that it is only when there are multiple
transactions which can be described as “business transactions” that any
dispute arising out of such transactions would come within the purview of
Section 64. In the light of such legislative intent, the provisions of
General Clauses Act, could not be called in aid by the appellant-society.
18. What is the true scope and meaning of the expression “business
transactions” appearing in clause (c) of Section 64(1) of the Act is what
falls for our consideration. That expression has not been defined in the
Act or elsewhere. Advanced Law Lexicon (3rd Edition, 2005) by P. Ramanatha
Aiyar describes the expression “Business transaction” as under:
“Business transaction is a generic expression used in the sense that it is
a transaction which a businessman, in a commercial business, would enter
into.”

19. The above meaning ascribed to the expression is fairly accurate hence
acceptable. All that may be added is that in order that a transaction may
be treated as “business transaction”, it must be a transaction that answers
the above description from the stand point of both the parties to the
transaction. It cannot be a business transaction from the standpoint of one
party to the transaction and something else from the other. It must be
business bilaterally. So viewed a single transaction where an owner of
immovable property agrees to sell his land to a society may or may not
constitute a business transaction, depending upon whether the seller is in
the business of selling property for profit. If the seller is not in any
such business, the transaction from his stand point will not be a business
transaction no matter, from the point of view of the society the
transaction may be a business transaction because the society is in the
business of buying land and developing it for the benefit of its members. A
transaction of sale of property would in such a case fall outside the
expression “business transaction”. A somewhat similar view was taken by
this Court in Manipur Administration vs. M. Nila Chandra Singh (AIR 1964 SC
1533). This Court was in that case dealing with the provisions of Manipur
Foodgrains Dealers Licensing Orders 1958. The question was whether a single
transaction of sale, purchase or storage of food grains was enough to make
the person concerned a dealer and whether any such act would constitute
business. Repelling the contention that a single transaction would also
constitute “business”, this Court observed:
“In dealing with the question as to whether the respondent is guilty under
Section 7 of the Essential Commodities Act, it is necessary to decide
whether he can be said to be a dealer within the meaning of clause 3 of the
Order. A dealer has been defined by clause 2(a) and that definition we have
already noticed. The said definition shows that before a person can be said
to be a dealer it must be shown that he carries on business of purchase or
sale or storage for sale of any of the commodities specified in the
Schedule, and that the sale must be in quantity of 100 mds. or more at any
one time. It would be noticed that the requirement is not that the person
should merely sell, purchase or store the foodgrains in question, but that
he must be carrying on the business of such purchase, sale, or storage; and
the concept of business in the context must necessarily postulate
continuity of transactions. It is not a single, casual or solitary
transaction of sale, purchase or storage that would make a person a dealer.
It is only where it is shown that there is a sort of continuity of one or
the other of the said transactions that the requirements as to business
postulated by the definition would be satisfied. If this element of the
definition is ignored, it would be rendering the use of the word “business”
redundant and meaningless. It has been fairly conceded before us by Mr.
Khanna that the requirement that the transaction must be of 100 mds. or
more at any one time governs all classes of dealings with the commodities
specified in the definition. Whether it is a purchase or sale or storage at
any one time it must be of 100 mds. or more. In other words, there is no
dispute before us that retail transactions of less than 100 mds. of the
prescribed commodities are outside the purview of the definition of a
dealer.”

20. Reference may also be made to the decision of this Court in Barendra
Prasad Ray and Ors. vs. Income Tax Officer ‘A’ Ward, Foreign Section and
Ors. (1981) 2 SCC 693 where this Court interpreted the word “business” and
held that the same was an expression of wide import and means an activity
carried on continuously and systematically by a person by the application
of his labour or skill with a view to earning profit. In B.R. Enterprises
etc. vs. State of U.P. and Ors. etc. (1999) 9 SCC 700 this Court held that
business is a term wider than trade. It includes almost anything which is
an occupation as distinguished from pleasure. The term must, however, be
construed according to its context. To the same effect are the decisions of
this Court in Mahesh Chandra vs. Regional Manager U.P. Financial
Corporation and Ors. (1993) 2 SCC 279, and S. Mohan Lal vs. R. Kondiah
(1979) 2 SCC 616.

21. Suffice it to say that while the expression “business” is of a very
wide import and means any activity that is continuous and systematic,
perceptions about what would constitute business may vary from public to
private sector or from industrial financing to commercial banking sectors.
What is certain is that any activity in order to constitute business must
be systematic and continuous. A single transaction in the circumstances
like the one in the case at hand would not constitute business for both the
parties to the transaction. At any rate, the legislature having used the
expression “business transactions” has left no manner of doubt that it is
not just a solitary transaction between a society, on the one hand, and a
third party, on the other, which would bring any dispute arising out of any
such transaction within the purview of Section 64(1)(c). The dispute must
be between parties who have had a series of transactions, each one
constituting a business transaction in order that the provisions of Section
64 are attracted and a dispute arising out of any such transaction brought
within its purview.

22. The argument that the plural used in the expression “business
transactions” must include the singular in view of the provisions of
Section 5(b) of the M.P. General Clauses Act has not impressed us. We say
so because Section 5 of the M.P. General Clauses Act, 1957 like Section 13
of the Central General Clauses Act postulates singular to include the
plural and vice-versa only if no different intention appears from the
context. That intention, in the case at hand, appears to be evident not
only from the scheme of the Act but also from the context in which the
expression “business transactions” has been used. The purpose and the
intent underlying the provision appears to be to bring only such disputes
under the purview of Section 64 as are disputes arising out of what is
business for both the sides and comprise multiple transactions. Decisions
of this Court in Newspapers Ltd. vs. State Industrial Tribunal, U.P. and
Ors. (AIR 1957 SC 532) and M/s. Dhandhania Kedia & Co. vs. The Commissioner
of Income Tax (AIR 1959 SC 219) have settled the legal position and
declared that the principle underlying Section 13 of the General Clauses
Act regarding singular including the plural and vice versa does not have
universal application and that the principle can apply only when no
contrary intention is deducible from the scheme or the language used in the
statute.
23. In the case at hand, that there was a single transaction whereunder
the respondents-sellers had agreed to sell to the appellant-society a
parcel of land to the society, for use by the society in terms of the
objects for which it is established. It may, in that sense, be a
transaction that touches the business of the appellant-society but it is
common ground that the respondents were not in the business of selling land
as a commercial or business activity for it is nobody’s case that the
respondents were property dealers or had a land bank and were, as a
systematic activity, selling land to make money. If the respondents were
agriculturists who had agreed to sell agricultural land to the appellant-
company, the transaction was, from their point of view, not a “business
transaction”. For ought we know that transaction may have been prompted by
family necessity, poverty or some such other compulsion. Such a transaction
without any business element in the same could not constitute a “business
transaction” leave alone “business transactions” within the meaning of
Section 64(1)(c).
24. For the reasons stated above Question No.2 is to be answered in the
negative.

25. In the result this appeal fails and is hereby dismissed, but in the
circumstances leaving the parties to bear their own costs.

……………………………………….…..…J.
(T.S. THAKUR)

……………………………………….…..…J.
(R.K. AGRAWAL)

……………………………………….…..…J.
(R. BANUMATHI)
New Delhi;
July 24, 2015

ITEM NO.1C-For Judgment COURT NO.2 SECTION IVA

S U P R E M E C O U R T O F I N D I A
RECORD OF PROCEEDINGS

C.A. No.5704/2015 @ Petition(s) for Special Leave to Appeal (C) No(s).
36497/2012

BHANUSHALI HSG. COOP. SOCIETY LTD. Appellant(s)

VERSUS

MANGILAL & ORS. Respondent(s)

With

Date : 24/07/2015 These matters were called on for pronouncement of
JUDGMENT today.

For Petitioner(s)
Ms. Pragati Neekhra,Adv.
Mr. Karanveer Jindal, Adv.

For Respondent(s) Mr. N.K. Mody, Sr. Adv.
Mr. A. Venayagam Balan,Adv.

C.A. No.5704/2015 @ SLP (C) No(s). 36497/2012

Hon'ble Mr. Justice T.S. Thakur pronounced the judgment of the
Bench comprising His Lordship, Hon'ble Mr. Justice R.K. Agarwal and Hon'ble
Mrs. Justice R. Banumathi.
Leave granted.
The appeal is dismissed in terms of the Signed Reportable
Judgment.
Conmt. Pet. © No. 96/2015 in SLP (C) No. 36497/2012

In view of our judgment delivered in the appeal today, we see
no reason to keep these proceedings on our board. The contempt petition is
accordingly dismissed.

(VINOD KR.JHA) (VEENA KHERA)
COURT MASTER COURT MASTER

(Signed Reportable judgment is placed on the file)

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