Co-operative Society vs Nandlal

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Not extracted

Decision Date: 12 October 1950

Coram: Mehr Chand Mahajan, R.S. Naik

In this matter the Supreme Court of India heard an appeal filed by the cooperative society against Raja Nandial. The appeal was recorded on 12 October 1950 and was decided by Justice Mehr Chand Mahajan, who sat with Justice R.S. Naik. The citation for the decision is 1950 AIR 274 and 1950 SCR 741. The dispute involved the application of Section 42 of the Co-operative Credit Societies Act, 1340 (Hyderabad). The section provides that where an award made by the Registrar, a person nominated by the Registrar, or a committee of arbitrators is not complied with, the Registrar may cause the award to be enforced either through a civil court on a certificate issued by him, or through a revenue court or officer on a certificate issued to that court or officer. The Court examined whether the Registrar, under this provision, possessed the same powers as a civil court when executing a decree. The Court held that the Registrar is not in the position of a court passing a decree under the Civil Procedure Code and therefore does not have the full powers of an executing court. The factual backdrop involved a disagreement between a member of the society and the society itself, which was referred to arbitration under the Act. The arbitrator framed a decree requiring payment of a sum in six equal monthly instalments, with a condition that any default on an instalment would cause the entire amount to become immediately due. Under Section 42 the decree was transmitted to the civil court on a certificate signed by the Registrar. After the member defaulted on the first instalment, the whole debt fell due and execution proceedings were instituted for the total amount. The Court concluded that the Registrar had no authority to accept the first instalment and to order the civil court to halt the execution proceedings. Accordingly, the civil court was entitled to disregard the Registrar’s directive and to continue with the execution of the whole decree. The appeal was presented under article 374(4) of the Constitution, seeking review of a judgment and decree of the High Court of Hyderabad dated 24 Aban 1356 F. The Court’s judgment, delivered by Justice Mahajan, therefore affirmed that the executing court may proceed with execution notwithstanding any contrary order from the Registrar.

In the present case the judgment-debtor was both a member of the society that held the decree and also the debtor owed by that society. A controversy developed between the debtor and the society, and according to the internal regulations that governed such cooperative societies the dispute was referred to arbitration. The arbitrator, on the nineteenth day of the month of Meher in the year 1352 F., issued a decree directing the debtor to pay a sum of Rs 8,100. The decree stipulated that the amount should be discharged in six equal monthly instalments, each bearing interest at the rate of six per cent per annum, and that the first instalment was to become payable at the close of the month of Azur 1353 F. Pursuant to section 42, clause (d) of the Cooperative Societies Act, the decree was transmitted on the second day of Dai 1353 F. to the civil court for execution. The transmission was effected by a certificate that bore the signature of Moulvi Mohammed Hasan, who held the office of Madadgar Nazim. The certificate set out the total amount recoverable as Rs 8,100 in principal together with Rs 6,669-0 as interest. On the same day the holder of the decree filed an application for execution before the Civil Court at Balda, seeking recovery of Rs 10,339-14-9. The decree-holder asserted that a default had occurred because the debtor had failed to make the first instalment that was due in the month of Azur 1353 F., and contended that, as a result of that default, the entire decretal sum had become immediately enforceable. The application therefore prayed that the property described in the petition be attached in order to satisfy the whole amount claimed.

On the third day of Dai 1353 F., which was one day after the execution application had been filed, the judgment-debtor deposited a sum of Rs 1,000 in the office of the Registrar of Cooperative Societies. The deposit was tendered as part of the first instalment, and the debtor expressed his willingness to make any further payments that might become due under that instalment. In response, the office of the Nazim informed the debtor that, because a default had been committed in respect of the first instalment, the entire decree was now due and that the Rs 1,000 already paid could not be accepted. Nevertheless, on the fifth day of Dai 1353 F., Mohammed Aihsan, an Assistant Madadgar Nazim, sent a letter to the Civil Court at Balda stating that an amount of Rs 1,034 had been deposited in the office of the Nizamat Co-operative Credit Societies and that, on that basis, the execution proceedings should be stayed or at least adjourned. When the civil court received this letter, the decree-holder raised an objection, arguing that the Registrar lacked any authority to stay the execution of the decree because the Registrar was not an executing court. The civil court rejected this objection and held that, according to the provisions of section 42 of the Co-operative Credit Societies Act, the Registrar retained the power to stay execution of the arbitral award even after issuing a certificate. Consequently, the court ordered that the execution proceedings be stayed. An appeal against this order was filed in the Sadar Adalat. The Sadar Adalat allowed the appeal in part, holding that, insofar as the Rs 1,000 (or Rs 1,034) had already been paid, the decree could not be executed against that portion, but it could be executed for the remaining instalments when they subsequently fell due. The court further found that the default clause contained in the decree should be considered to have been condoned by the…

In this case, the decree-holder lodged a second appeal before the High Court after the first instalment had been deposited with the Registrar’s office. The High Court concluded that because the first instalment had not been paid, a default had occurred; consequently, the decree-holder possessed the right to enforce the entire decree and that neither the Registrar nor the court executing the decree could lawfully strip the decree-holder of that right. Nevertheless, the High Court held that the Registrar nevertheless retained authority to adjourn the execution proceedings. The judgment-debtor’s argument that the certificate was invalid because it had been issued by a Madadgar Nazim was rejected. The Court observed that the Madadgar Nazim had duly delegated the relevant powers, and that any defect was cured by the issuance of a fresh certificate signed directly by the Nazim. Accordingly, the decision of the executing court to adjourn the execution was upheld.

The appeal then turned to the first substantive issue, namely the jurisdiction of the Registrar who acts under the Co-operative Credit Societies Act with respect to the execution of decrees. The resolution of this question required an interpretation of the wording used in section 42, clause (d), of the Cooperative Credit Societies Act, 1340 F., as amended. The provision reads as follows: “If an award given by the Registrar or by a person nominated by him, or by a committee of arbitrators is not acted upon, then the Registrar can have it enforced- (a) through a civil court on a certificate issued by him. The civil court will treat the award in the same way as its own decree; (b) through a Revenue Court or officer by issuing a certificate to that court or officer.” The language of this section does not elevate the Registrar to the status of a court that passes a decree under the Civil Procedure Code. Under that Code, a civil court that passes a decree also acts as the executing court, possessing a dual capacity: first, as the court that passes the decree, and second, as the court that executes it. The Registrar, by contrast, appears to possess only the first capacity, akin to a civil court that can issue a certificate to transmit the award either to another civil court or to a revenue officer. The statute merely confers on the Registrar the power to issue such a certificate and, on the basis of that certificate, to direct the award to the appropriate forum. It may also permit the Registrar, after issuing a certificate, to cancel it, issue a new one, or withdraw the execution from a civil court and refer it to a revenue court, or vice versa. On the plain wording of the provision, it cannot be said that the Registrar has been constituted as an executing court, nor that any execution-related powers have been vested in him. The question that therefore arises is whether, given this construction of the section, the Registrar was authorized to intervene in execution proceedings that were already pending in a civil court on the basis of the certificate he had granted.

In this case the Court examined whether the Registrar possessed any authority to intervene in execution proceedings that were already pending before a civil court, based solely on the certificate that he himself had issued. To answer that question the Court first described the factual steps taken by the Registrar. The decree debtor had failed to pay the first instalment of the award, thereby falling into default. Consequently the entire amount of the decree became immediately due and the decree holder had obtained a decree of execution to recover the whole sum. After the execution application was filed, the Registrar received the first instalment from the debtor, accepted that payment, and directed the executing civil court to suspend further execution measures. The Court held that the Registrar’s act of receiving the instalment and asking the court to stay the proceedings amounted to an unauthorized intrusion into the functions of the executing court. Payment toward satisfaction of a decree that is already under execution may be made only in the court that is executing the decree, unless the same court that passed the decree also has execution jurisdiction. The Court observed that, as previously indicated, the Registrar does not enjoy such execution jurisdiction. Therefore, the Court concluded that the Registrar’s request to the executing court to halt the execution and his acceptance of the instalment exceeded the powers granted to him, and that the executing court was fully justified in disregarding the Registrar’s interference. The Court emphasized that the statutory language confines the Registrar’s authority to issuing a certificate for the purpose of directing the decree to a civil or revenue court, and nothing beyond that.

Further, the Court noted that the Registrar had no power to modify or amend the award decree issued by the Arbitrator at any stage of the execution process. While several lower tribunals had construed the relevant statutory provision to mean that the Registrar, acting as the court that passed the decree, possessed the same powers as a court that executes a decree, the Supreme Court could not accept that interpretation because the plain wording of the section did not support such a reading. The Court rejected the analogy drawn from the Civil Procedure Code, which provides that the parent court that passes a decree retains the inherent jurisdiction to execute that decree even after the execution is transferred to another court. Under the Code, the parent court may delegate execution to other courts when it is unable to do so effectively, but such delegation does not divest the parent court of its own execution power. In contrast, the Registrar’s statutory role is entirely different; he is not a court of law and the statute expressly limits his function to obtaining execution of the decree through a civil court or a revenue court by issuing a certificate. Consequently, the Registrar cannot stay execution proceedings or alter the decree, and any attempt to do so is beyond his statutory mandate. Accordingly, the executing court was authorised to proceed with the enforcement of the full decretal amount with interest, without being bound by the Registrar’s certificate or his request for a stay.

The Registrar could approach only the revenue court, and his sole authority was to issue a certificate for that purpose. The High Court, however, was found by this Court to have issued an opinion that conflicted with its own findings. The High Court held that the first appellate court had erred in concluding that the default clause in the decree was waived by the judgment-debtor’s payment of the first instalment in the Registrar’s office. It further held that, once a default occurred, the Registrar possessed no jurisdiction to condone that default and that the decree-holder was therefore entitled to enforce the decree for the entire amount of the decree together with interest. Despite reaching that conclusion, the High Court nevertheless upheld the lower courts’ order that adjourned the execution proceedings. The logical consequence of the High Court’s reasoning was that the certificate remained valid, the application for execution had been properly made, and the decree-holder was entitled to the relief claimed; yet the High Court also held that the Registrar could stay the proceedings. This Court considered that the Registrar’s request to the civil court to stay the pending execution proceedings constituted a clear encroachment on the powers of the executing court, exceeded his statutory authority, and should have been disregarded by the courts. Because a fresh certificate had been issued by the Nazim to remedy any defect that might have existed in the original certificate, which had been sent by the Madadgar Nazim, it was unnecessary to entertain the counsel’s contention that there was no proper certificate and that the execution proceedings therefore lacked jurisdiction. Accordingly, this Court allowed the appeal, set aside the judgments of all three lower courts, and directed the executing court to continue the execution of the decree from the point at which it had been disrupted by the letter received from the Registrar’s office. No order regarding costs was made. The appeal was allowed.