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                                                     REPORTABLE  

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

Civil Appeal No.766/2016 (arising out of SLP(C) No. 17535/2011)

M.K.INDRAJEET SINHJI COTTON P.LTD.             …..Appellant (s)

VERSUS

NARMADA COTTO COOP.SPG.MILLS LD.& ORS  ...Respondent(s)

J U D G M E N T

S A BOBDE, J

Leave granted.

2. This appeal is preferred by a Company which has been  

refused permission to continue the suit filed by it before the  

City Civil  Court,  Ahmedabad by the Registrar of Co-operative  

Societies  on the ground that the suit is  not tenable because  

notice of its institution required by Section 167 of the Gujarat  

Co-operative Societies Act, 1961 (hereinafter referred to as the  

Co-operative Societies Act).  

3. The appellant, a Private Limited Company entered into a  

lease  agreement  dated  1-10-1998.   Under  the  agreement  it  

took on lease the mill of the respondent Cooperative Society for  

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a period of  five years.  Disputes  having arisen,  the appellant  

filed a suit against the respondent society on 26-4-2000 before  

the  City  Civil  Court  at  Ahmedabad.   The  appellant  sought  

recovery of Rs.2,51,89,606.79/- (Rupees Two Crores, Fifty One  

Lakhs, Eighty Nine Thousand, Six Hundred Six and Paise Seven  

Nine only) with interest at the rate of 21% per annum.  

4. Within a year of filing the suit, the defendant Society, the  

respondent herein, was wound up by an Order dated 19-4-2001  

passed by the  Commissioner,  Cottage and Village Industries,  

Gujarat. Since the suit had been filed prior to the winding up  

order, the appellant was obliged to apply for leave to continue  

the suit by virtue of Section 112 of the Co-operative Societies  

Act. That Section reads as follows:-

“112.Bar  of  suit  in  winding  up  and  dissolution  matters

“Save  as  expressly  provided  in  this  Act,  no  Civil  Court shall take cognizance of any matter connected  with the winding up or dissolution of a society under  this  Act;  and  when  a  winding  up  order  has  been  made no suit or other legal proceedings shall lie  or  be  proceeded  with against  the  society  or  the  liquidator,  except  by  leave  of  the  Registrar,  and  subject to such terms as he may impose:

Provided  that  where  the  winding  up order  is  cancelled, the provisions of this section shall cease to  operate so far as the liability of the society and of  the members thereof to be sued is concerned, but  they shall continue to apply to the person who acted  as liquidator.”                           (emphasis supplied)

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5. The controversy  is:  whether  the  Registrar,  while  

considering whether leave should be granted can hold that the  

suit itself is not tenable for want of notice. Initially the Registrar  

passed  a  non-speaking  order  dated  6-6-2003  refusing  

permission to continue the suit. On 28-11-2005, however, the  

Registrar  passed  a  speaking  order  refusing  permission  to  

continue the suit.  It  is  this  order  that  has given rise to the  

present controversy. The main reason why the Registrar refused  

permission to continue the suit for recovery of money against  

the respondents is that according to the Registrar, Section 167  

of  the  Co-operative  Societies  Act  requires  a  plaintiff  to  give  

notice to the Registrar stating the cause of action and the relief  

which the plaintiff claims. Such a notice not having been given  

by  the  appellant,  the  appellant  is  not  entitled  for  leave  to  

continue  the  suit  against  the  defendant.   In  other  words,  

according to the Registrar, the plaintiff's suit is not tenable for  

want  of  notice  under  Section  167  and,  therefore,  leave  to  

continue such a suit is liable to be refused under Section 112 of  

the Co-operative Societies Act. Section 167 reads as under:

“167.  Notice necessary in suits

Save as otherwise provided in this Act, no suit  shall  be  instituted  against  a  society,  or  any  of  its  officers, in respect of any act touching the business  of  the  society,  until  the  expiration  of  two  months  next after notice in writing has been delivered to the  Registrar or  left  at  his  office,  stating the cause of  

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action, the name, description and place of residence  of the plaintiff and the relief which he claims, and the  plaint shall contain a statement that such notice has  been so delivered or left.”  

6. In  view  of  such  refusal,  the  appellant's  suit  became  

untenable. The appellant, therefore, challenged the order of the  

Registrar refusing leave before the learned Single Judge of the  

Gujarat High Court. The learned Single Judge allowed the writ  

petition and quashed the Registrar's Order. The learned Single  

Judge held that the question whether a notice under Section  

167 was necessary in a given case could only be decided by a  

competent civil court since such a decision required an inquiry  

and  a  decision  whether  the  suit  was  in  respect  of  any  act  

touching  the  business  of  the  society  and  generally  whether  

Section 167 applied to such a suit. The learned Single Judge  

also  held  that  Section  112  of  the  Act  casts  a  duty  on  the  

Registrar  to  grant  or  refuse  leave  and  only  such  an  

administrative decision can be taken by the Registrar.  Further,  

such  a  limited  administrative  decision  can  be  taken  by  the  

Registrar only on considerations germane to the grant or refusal  

of the leave and not on considerations which were within the  

jurisdiction of a competent city civil court.  

7. Aggrieved, the respondents preferred an appeal before a  

Division Bench of the Gujarat High Court. The Division Bench  

has  allowed  the  appeal  and  thus  upheld  the  order  of  the  

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Registrar refusing leave to continue the suit on the ground that  

the suit is not tenable by virtue of failure to give notice under  

Section 167 of the Co-operative Societies Act. The appellant is  

thus in appeal.

8. We have heard the learned counsel for the parties.

9. A decision regarding the correctness or otherwise of the  

view of the Division Bench must be taken with regard to the  

relevant provisions of the Co-operative Societies Act. It is also  

necessary to ask if the decision that the suit is not tenable if  

notice is not given is judicial in nature. Section 167 is preceded  

by  Section  166  which  bars  the  jurisdiction  of  Courts  in  any  

matter concerned with the winding up and dissolution of the  

Society,  vide  Section  166  (1)(c).  The  clear  intention  of  the  

legislature is to bar a civil court from entertaining any matter  

concerned with the winding up and dissolution of the society. In  

order to give effect to this provision, the legislature has enacted  

Section  167  which  makes  it  mandatory  for  a  plaintiff  who  

intends to institute a suit against a society or any of its officers  

in respect of an act touching the business of the society to give  

a clear notice of his intention to sue. The Section prohibits a  

plaintiff from instituting a suit until the expiration of two months  

after notice in writing has been delivered to the Registrar. There  

seems  little  doubt  that  this  Section  imposes  a  mandatory  

requirement that if the conditions prescribed by it exist, that is  

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to say if the suit proposed to be filed is against a society or any  

of its officers and is in respect of any act touching the business  

of  the  society  then it  must  be  preceded by a notice  of  two  

months. It is obvious that the question whether Section 167 is  

attracted to a particular suit or not depends upon an inquiry  

into the nature of the suit, in particular whether it affects the  

business  of  the  society  and  the  parties  to  the  suit.  Such  a  

decision is obviously within the jurisdiction and competence of  

the civil court where the suit is instituted and must therefore be  

regarded as judicial.  

10. The question that thus arises is whether a Registrar who  

is  empowered by Section 112 to decide the limited question  

whether leave should be granted or refused to institute or to  

continue a suit against a society in liquidation is competent to  

take into account whether a suit is tenable for want of notice  

under Section 167 of the Co-operative Societies Act and on that  

basis refuse permission to institute or continue a suit, if he finds  

it untenable.    

11. It is therefore necessary to examine the scope of the two  

provisions.   Section  112  bars  a  Civil  Court  from  taking  

cognizance  of  any  matter  connected  with  winding  up  of  a  

society.  It further confers the power on the Registrar to grant  

or refuse leave to institute a suit against such society or the  

liquidator where a winding up order has been made against the  

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society. We are concerned here with the nature and scope of  

the power conferred on the Registrar.  Such power is conferred  

on  the  Registrar  to  consider  whether  a  suit  should  be  filed  

against  a  society  which  is  under  liquidation.   The  obvious  

considerations that must be taken into account are whether the  

suit  would  have  the  effect  of  dissipating  the  properties  or  

diverting the properties of the society in liquidation towards one  

creditor i.e. the plaintiff instead of being equitably distributed  

amongst the whole body of creditors as contemplated by the  

provisions for winding up of the society.  The Registrar is not  

concerned with the merits or the tenability of the suit which is,  

in any case not before him, and indeed cannot be because such  

a  suit  can  only  be  tried  and  conclusively  decided  by  a  Civil  

Court.  Naturally it is the Civil  Court which can alone decide  

whether the suit is triable and tenable. It would thus be outside  

the  scope  of  the  Registrar’s  power  to  take  into  account  the  

factor whether the suit is tenable in law or not.  The question of  

tenability  being  judicial  is  purely  within  the  jurisdiction  and  

competence of the court where the suit is pending.  This must  

be left entirely to the Civil Court as intended by the Legislature.  

There is  no doubt  that  a  question whether  a  suit  is  tenable  

under Section 167 of the Co-operative Societies Act for want of  

notice  under  the  said  provision  is  a  question  within  the  

exclusive competence of a Civil Court, as indeed all questions of  

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tenability are.  Thus, the Registrar cannot look into the question  

whether the suit is tenable for want of notice and decide the  

question directly or impliedly and thereby decide whether leave  

to institute or continue a suit could be granted or withheld.  

12. In the present case the Registrar having refused leave to  

continue the suit on the ground that the suit pending before the  

Court is not preceded by a notice under Section 167 of the Act  

has  acted  without  jurisdiction;  having  taken  into  account  a  

factor which he was not competent to take into account and  

determine the grant of  leave to proceed with  the suit.  As a  

matter of law the decision to hold that the suit is not tenable is  

a  decision  which  conclusively  determines  the  suit  and  being  

judicial can be taken by the Civil Court alone.  The Registrar  

cannot hold the suit to be untenable even for the purpose of  

considering grant of leave.  In other words, the Registrar has no  

jurisdiction to hold that the suit is not tenable.

13. We thus have no doubt that the order of the Registrar  

dated 28-11-2005 refusing leave to the appellant on the ground  

that the notice under Section 167 has not been issued therefore  

the suit is not tenable, is liable to be set aside. It is not possible  

to agree with the view of the Division Bench that the Registrar  

must be allowed to consider whether notice has been given or  

not  and,  therefore,  whether  the  suit  is  maintainable  or  not  

because if such power is not conceded to the Registrar, it would  

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result in the civil court taking cognizance of a matter which it  

would have no power to take cognizance of. This argument is  

completely  untenable  where  the  question  is  one  of  leave  to  

continue a suit as distinct from leave to institute a suit. It is  

only  in  the  latter  case  that  this  reasoning  would  have  any  

relevance. In any case, it is not the business of the Registrar to  

consider the merits and in particular the tenability of a pending  

suit and hold it to be untenable and thereupon refuse leave to  

continue  the  suit.  The  Civil  Court  is  perfectly  competent  to  

decide whether the suit before it is tenable or not.  

14. In the result, the appeal succeeds and is hereby allowed.  

The  Registrar  shall  decide  the  question  of  permission  to  

continue the suit, afresh.

...............................J (S.A. BOBDE)

................................J     (AMITAVA ROY) NEW DELHI, 26th April, 2016  

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