Holding

Section 60(1) determines the scope of arbitrable disputes and the matter, touching the management of the society, falls within Section 60, making the arbitration award valid.

Summary

The appellant, a former president of Jupiter Cooperative Group Housing Society, was challenged for alleged irregularities in the purchase of building material by the past managing committee. The Registrar of Cooperative Societies referred the dispute to arbitration under Section 60 of the Delhi Co‑operative Societies Act, 1972, and an arbitrator passed an ex‑parte award against the appellant. The appellant contended that the matter should be dealt with under Section 59 (surcharge) and not Section 60, arguing that Section 60(2) is exhaustive and the dispute does not fall within its ambit. The Supreme Court held that Section 60(1) defines the true scope of arbitration disputes, while Section 60(2) is merely illustrative, and that the dispute concerning management of the society clearly falls within Section 60(1)(c). Consequently, the ex‑parte award and the earlier dismissals were upheld and the appeal was dismissed.

Issues considered

Whether the dispute over alleged irregularities in purchase of building material falls within the ambit of Section 60 (arbitration) or Section 59 (surcharge) of the Delhi Co‑operative Societies Act, 1972.
Whether sub‑section (2) of Section 60 is exhaustive or merely illustrative of the categories of disputes covered by Section 60(1).

Legislation cited

Delhi Co-operative Societies Act, 1972s. 59, s. 60
Madras Co-operative Societies Act, 1932s. 49, s. 51

Subjects

arbitrationcooperative societiesSection 60Section 59ex parte awardsurchargemanagement disputeDelhi Co-operative Societies Act

Judgment

PREM JEET KUMAR
A
v.
SURENDER GANDOTRA AND ORS.

AUGUST 27, !991

B [L.M. SHARMA AND J.S. VERMA. JJ.I

Delhi Co-Operative Societies Act, 1972. Sections 59 and 60-
Dispute relating to irregularities in purchase of building materials
by the past Managing Committee-Whether falls within the ambit of
Section 60.
c -,._.

On a complaint made by the Managing Committee of the 6th
respondent Cooperative Housing Society, the third respondent,
Registrar, Cooperative Societies, referred the dispute relating to irre-
gularities in the purchase of building material for construction of flats
D for members of society by the past Managing Committee, of which the
appellant was the President at the relevant time, to arbitration. The
first re•pondent-Arbitrator, gave his ex-parte award, on the failure of
the ajlpellant and another person to file their reply to the claim of the
claimant society, and directed the appellant and the other person to pay
the society certain sum with interest thereon. ·
E
The appellant challenged the award before second respondent,
the Delhi Cooperative Tribunal, which dismissed the samr holdin~ that
the Arbitrator's act of proceeding ex-parte was justified and that the
appeal had no merit. The appellant's writ petition was also dismissed by
. ,.1-
the High Court. ." ,l(_
F
In the appeal before this Court on behalf of the appellant it was
contended that it was Sec. 59 dealing with surchage which was applic-
able to the instant case and not Section 60, which pertained to settlement
of disputes by arbitration since the dispute in question was one which
could not be referred to arbitration in terms of Section 60 of the Act.
G
On behalf of the contesting respondents ii was submitted that it
was Section 60, which was applicable and not Section 59.

Dismissing the appeal, this Court,

H HELD: 1.1 Sub-Section (I) of Section 60 of the Delhi Co-operative

782
PREM JEET v. SURENDER GANDOTRA [VERMA. J.I 783

Societies Act, 1972 indicates the true scope of the Section 60, while
A
sub-section (2) is merely illustrative, and not exhaustive. Clause (c) of
sub-section (!) expressly provides that if any dispute touching the
constitution/management or the business of the cooperative societ~
arises between the society or its committee and any past committee. an)
officer, agent or employee or any past officer of·the society, the dispute
should be referred to the arbitration. [787H, 788A-B, D] B

J.2 In the instant case, the dispute, viz. irregularities in the
purchase of building material for construction of flats for the members
of the Society by the previous Managing Committee, touches the
management of the Society and falls within the ambit of Section 60 of
the Act. The third respondent, Registrar, Cooperative, Societies was.
therefore, right iu referring the dispute to arbitration. [789D-F] c
Pentakota Srirakulu v. The Cooperative Marketing SvCiet.)" L!J ..
[19651lSCR186, followed.

ChanJ,,. Nagar Cooperative House Building Society L!J. and D
Anr. v. Ashok Ohri, AIR 1976 63 Delhi 239, disapproved.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3237
of lYY L

From the Judgment and Order dated 10.10.1990 of the Delhi E
High Court in C. W. No. 3204 of 1990.

Soli J. Sorabjee, S.V. Deshpande and C.L. Sahu, Advs. for the
Appellant.

Dr. Y.S. Chi tale, and S.K. Sinha for the Respondents. F

The Judgment of the Court was delivered by

VERMA, J. Leave is granted.

Respondent No. 6, Jupiter Cooperative Group Housing Society G
t Limited, was formed in 1979 for providing houses to its 130 members
including the appellant Prem Jeet Ku.mar. The appellant was earlier
the Secretary and then the President of the Society till 1985, by which
time substantial construction had been completed. The.members were
allotted three-room flat for a sum of Rs. I, 10,000. In August, 1985,
Respondent No. 3, Registrar, Delhi Cooperative Societies, appointed H
784 SUPREME COURT REPORTS [1991] 3 S.C.R.

an Administrator to look into the affairs of the Society since the appel-
A
lant and other office bearers had held the office for more than two
terms. The controversy giving "rise to this proceeding relates to the
alleged discrepancy regarding purchase of some building material in
· January, 1984, for the construction of flats for members oi the Society
in Vikas Puri at New Delhi. The New Managing Committee of the
B Society formed in September, 1986, complained to the Registrar,
Cooperative Societies alleging irregularities by the previous Managing
Committee of which the appellant was the President. This matter was
referred to arbitration by order .dated 12.10.1989 passed by the Joint
Registrar (Arbitration) Cooperative 'Societies, Delhi Administration.
Respondent No. 1, Surender Gandotra was appointed the Arbitrator,
c who gave his Award on 1.5.1990. The relevant portion of the Award is
as under:

"It is also interesting to discuss the conduct of these
two respondents of this case, Shri Poonam Dhand and Shri •
P.J. Kumar as they have been moving· applications after
D applications in this court raising vicious and frivolous
grounds just to delay .the delivery of justice in this case.
The miscellaneous applications relating to the dispute of
jurisdiction of this court and then that since criminal pro-
ceedings are pending with the Delhi Police, proceedings in
this Court should be kept pending till final decision in the
E criminal proceedings. All these applications were properly
attended, scrutinized and disposed of legally. It is also
interesting that despite number of chances/opportunities
having been given to the respondent to file reply to the
main points of the claimant society, the d'efendants S/Shri
Poonam Dhand and Shri P .J. Kumar did not file any reply
F and followed delaying and dilatory tactics and to defeat the
ends of justice. Even today 30th April, 1990, fixed for hear-
ing none came from the side of S/Shir Poonam Dhand, P.J.
Kumar either presonally or through Advocate. The advo-
cate of the claimant society Shri Tomar argued that ex
parte proceedings may be initiated against the respondents
G who have absented from these proceedings. In view of
these cricumstances, and the conduct of respondents in this
case right from the very inception of this case, there is no
other alternative left for me but to proceed ex parte against
the respondents S/Shri Poonam Dhand and·P.J. Kumar.

H Ex parte award is. announced with the following
details;
PREM JEET v. SURENDER GANDOTRA [VERMA, J.] 785

Principal amount to be paid by the respon- A
dents to the Jupiter Cooperative Societies
Limited, Vikas Puri, New Delhi. Rs.1,46,210.20
Interest at the rate of 18% from 17.4.1985 till
all the dues are cleared by the respondents.
Cost allowed Rs.5,000.00 B

\ With the above observations, ex.parte award is given
against the respondents S/Shri Poonam Dhand, P.J. Kumar
who are jointly and severally responsible to pay the Jupiter
\ Cooperative Group Housing Society Limited, Vikas Puri,
\ New Delhi, principal amount of Rs.1,46,210.00 NPS plus
\ 18% interest from 17.4.1985 till all the dues are cleared and c
\ costs of Rs.5,000."
\
• The appeilant then filed an appeal under section 76 of the Delhi
Cooperative Societies Act, 1972 (hereinafter referred to as 'the Delhi
Act') in the Delhi Cooperative Tribunal (Respondent No. 2) challeng- ·o
ing the Award dated 1.5.1990. The Tribunal held that the Arbitrator's
act of proceeding ex parte against the appellant is justified and taking
the view that the appeal had no merit, dismissed the same. The appel-
lant then filed a writ petition in the High Court challenging the Award
and dismissal of his appeal by the Tribunal on 3. 7.1990. The said writ
petition h_as been dismissed by the High Court on 10. 10.1990. lt is in E
these cir.cumstances that the appellant assails the Award, dismissal of
the appeal and then.the writ petition. The argument of Shri Sorabjee.
learned counsel for theiippellant, is that it is section 59 and not section
·60 of the Delhi Act which applies to the present case. Jn reply, Dr.
Chi tale on behalf of the contesting respondents contended that section
60 relating to arbitration and not section 59 pertaining to surcharge F ·
applies to the present case. Sections 59 and 60 of the Delhi Act, insofar
as relevant, are quoted hereinbelow:-

"59. Surcharge-(!) If in· the course of an audit,
inquiry, inspection or the winding up of a cooperative
society, it is found that any person, who is or was entrusted G
with the organisation or management of such society or
who is or has at any time been an officer or an employee of
the society, has made any payment contrary to this Act, the
rules or the bye-laws or has caused any deficiency in the
assets of the society by breach of trust or wilful negligence
or has misappropriated or fraudulently retained any money H.
786 SUPREME COURT REPORTS I1991] 3 S.C.R.
or other property belonging to such society, the Registrar
A
may, of his own motion or on the application of the com-
mittee, liquidator or any creditor, inquire himself or direct·+
any person authorised by him, by an order in writing in this
behalf, to inquire into the conduct of such person;

B Provided that no such inquiry shall be held after the I
expiry of six years from the date of any act or omission I
referred to in this sub-section.

(2) Where an inquiry is made under sub-section (}),
the Registrar may, after giving the person concerne<(an \ ..
opportunity of being heard, make an order, requiring him
c to repay or restore the money or property or a'f! part
thereof, with interest at such rate, or to pay cont;1bution
and costs or compensation to such extent, as the Registrar
may consider just and equitable." -

D "60. Disputes which may be referred to arbitration-
(!) Notwithstanding anything contained in any law for the
time being in force, if any dispute touching the constitu-
tion, management or the business of a cooperative society
other than a dispute regarding disciplinary action taken by
the society or its committee against a paid employee of the
E society arises-:-

(a) among members, past members and persons
claiming through members, past members and decease~
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

(c) between the society or its committee and any past
G committee. any officer, agent or employee, or any past
officer, past agent or past employee or the nominee, heirs
or legal representatives of any deceased officer, deceased
agent, or deceased employee of the society' or

(d) between the society and any other cooperative
H society, between a society and liquidator of another society
PREM JEET v. SURENDER GANDOTRA [VERMA. J.] 787

or between the liquidator of another society.
A
such disputes shall be referred to the Registrar for decision
and no court shall have jurisdiction to entertain any suit or
other proceedings in respect of such dispute.

(2) For the purposes of sub-section (l), the following B
shall be deemed to be disputed touching the constitution,
management or the business of a cooperative society,
namely-

(a) a claim by the society for any debt or demand due
to it from a member or the nominee, heirs or legal rep-
resentatives of a deceased member, whether such debt or C
demand is admitted or not;

(b) 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 D
principal debtor as 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 elec-
tion of any officer of a society other than a society
mentioned in sub-section(!) of section 31. E

(3) If any question arises whether a dispute referred
to the Registrar under this section is or is not a dispute.
touching the consitution, management or the business of a
cooperative society, the decision thereon of the Registrar
shall be final and shall not be called in question in any F
court.

,,
(4)

In substance the contention of the learned counsel for the appel-
lant is that the proper action to take in such a case is to resort to G
section 59 dealing with surcharge and not to settlement of disput~ by
arbitration since it is not one of the disputes which may be referred to
arbitration in terms of section 60 of the Delhi Act. It was argued that
sub-section (2) of section 60 is exhaustive and not merely illustrative
which shows that the present dispute does not fall within the ambit of
section 60. Dr. Chitale, on the other hand, asserted that it is sub· H
788 SUPREME COURT REPORTS [ 1991] 3 S.C.R.

section ( 1) of section 60 which indicates the true scope of section 60
A
while sub-section (2) is merely illustrative and no exhaustive. It was
urged that clause (c) of sub-section ( 1) of section 60 expressly provides
that if any dispute touching the constitution, management or the busi- --+
ness of the cooperative society arises berveen the society or its com-
mittee and any past committee, any officer, agent or employee or any
B past officer of the society, the dispute shall be refered to arbitration.

Reliance is placed on behalf of the appellant on Chander Nagar
Cooperative House Building Society Ltd. and Anr. v. Ashok Ohri,
A.LR. 1976 63 Delhi 299 wherein the learned Single Judge took the
view that sub-section (2) of section 60 of the Delhi Act is exhaustive,
and not merely illustrative. That decision overlooks the decision of this
c Court in Srirakulu referred hereafter and conflicts with it. Furiher
consideration of the same is, therefore, not necessary.

Dr. Chitale placed reliance in Pentakota Srirakulu v. The
Cooperative Marketing Society Ltd., [19651 1SCR186 to contend that
D this point was concluded against the appellant. In our opinion, the
contention of Dr. Chitale has to be accepted. The decision of this
Court in Srirakulu was rendered ·with reference to the Madras
Cooperative Societies Act, 1932 (hereinafter referred to as 'the
Madras Act') wherein section 51 relating to settlement of disputes by
arbitration was the provision corresponding to section 60 of the Delhi •
E Act. Clause (c) of sub-section ( 1.) of section 51 of the Madras Act was
substantially the same as clause (c) of sub-section (1) of section 60 of
the .Delhi Act. The explanation in sub-section ( 1) of section 51 of the
Madras Act was substantially similar to clause (a) of sub-section (2) of
section 60 of the Delhi Act. The material part of section 51 of the . l.
Madras Act, on the basis of which the decision was rendered in
F Srirakulu quoted therein is as under-

"S.51-

Arbitration:

G Disputes: 51. ( 1) If any dispute touching the business
of a registered society (other than a dispute regarding disci-
plinary action taken by the society or its committee against
a paid servant of the society) arises-

(a) ...........................................
H (b)
PREM JEET v. SURENDER GANDOTRA [VERMA, J.] 789

(c) between the society or its committee and any past A
committee, any officer, agent or servant, or any past
officer, past agent or past servant, or the nominee, heirs
or legal representatives of any deceased officer, deceased
agent or deceased servant, of the society, or
B
Wl ············································
Explanation-A claim by a registered 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,
is a dispute touching the business of the society within the C
meaning ohhis sub-section."

In the Madras Act, section 49 was the provision corresponding to
section 59 of the Delhi Act. It was, therefore, on the basis of similar
corresponding provisions that the question arose for decision of this D
Court in Srirakulu. In Srirakulu also the facts disclosed in the inquiry
that certain loss was caused to the society by the acts of past Managing
Committee and, therefore, a special officer appointed to look into the
affairs of the societymade a claim under section 51 of the Madras Act
before the Registrar against the past President of the Society. It was
.. held that the Registrar's order under section 51 of the Madras Act
could not be challenged. We do not find any significant difference
E
between the provisions of the Madras Act which form the basis of this
Court's decision in Srirakulu and sections 59 and 60 of the Delhi Act
with which we are concerned to justify taking a different view as sug-
gested by learned counsel for the appellant. Following the view taken
.l .
in Srirakulu, this appeal must fail. Consequently, the appeal is dismis-
p
sed with costs quantified at Rs.5,000.

N.P.V. Appeal dismissed.