{"id":156709,"date":"1966-10-12T00:00:00","date_gmt":"1966-10-11T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/bihta-co-operative-development-vs-the-bank-of-bihar-ors-on-12-october-1966"},"modified":"2015-03-06T09:49:20","modified_gmt":"2015-03-06T04:19:20","slug":"bihta-co-operative-development-vs-the-bank-of-bihar-ors-on-12-october-1966","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/bihta-co-operative-development-vs-the-bank-of-bihar-ors-on-12-october-1966","title":{"rendered":"Bihta Co-Operative Development &#8230; vs The Bank Of Bihar &amp; Ors on 12 October, 1966"},"content":{"rendered":"<div class=\"docsource_main\">Supreme Court of India<\/div>\n<div class=\"doc_title\">Bihta Co-Operative Development &#8230; vs The Bank Of Bihar &amp; Ors on 12 October, 1966<\/div>\n<div class=\"doc_citations\">Equivalent citations: 1967 AIR  389, \t\t  1967 SCR  (1) 848<\/div>\n<div class=\"doc_author\">Author: G Mitter<\/div>\n<div class=\"doc_bench\">Bench: Mitter, G.K.<\/div>\n<pre>           PETITIONER:\nBIHTA  CO-OPERATIVE DEVELOPMENT CANE MARKETING\tUNION  LTD.,\n\n\tVs.\n\nRESPONDENT:\nTHE BANK OF BIHAR &amp; ORS.\n\nDATE OF JUDGMENT:\n12\/10\/1966\n\nBENCH:\nMITTER, G.K.\nBENCH:\nMITTER, G.K.\nWANCHOO, K.N.\nSHELAT, J.M.\n\nCITATION:\n 1967 AIR  389\t\t  1967 SCR  (1) 848\n CITATOR INFO :\n R\t    1973 SC1034\t (23)\n F\t    1985 SC 582\t (49)\n R\t    1987 SC1603\t (25)\n R\t    1989 SC 227\t (32)\n\n\nACT:\nBihar and Orissa Co-operative Societies Act (6 of 1935),  s.\n48  as\tamended by Bihar Act 16 of 1948 and s.\t57-  Dispute\nbetween\t registered society and\t non-member-Jurisdiction  of\nCivil Court, when ousted.\n\n\n\nHEADNOTE:\nThe first plaintiff was a Society registered under the Bihar\nand Orissa Co-operative Societies Act, 1935, and the  second\nplaintiff  was\tits Secretary.\tThe Society had\t an  account\nwith  the  first  defendant  Bank.   The  6th  and  the\t 7th\ndefendants  were  the joint secretary and treasurer  of\t the\nSociety respectively, who were jointly authorised to operate\non the account.\t A sum of Rs. 11,000 was withdrawn from\t the\naccount\t by means of a cheque which did not come out of\t the\ncheque book of the Society but which was a loose cheque form\nsurrendered by an ex-constituent of the Bank.  The  spurious\ncheque\tbore  the  signature of the 7th\t defendant  and\t the\nforged signature of the 6th defendant.\tThe suit against the\nBank,  its  manager (the 2nd defendant) its  employees\t(the\n3rd,  4th  and 5th defendants) and ,defendants 6 and  7\t was\ndecreed\t against  defendants 1, 2, 4, 5 and  7\tjointly.  On\nappeal\tby the 1st and 2nd defendants, the High Court  found\nin  favour of the plaintiffs-on the merits of the case,\t but\ndismissed  the suit on the ground that the  jurisdiction  of\nthe civil court was ousted by the combined operation of\t ss.\n48(9) and 57 of the Act.\nOn  appeal to this Court, the defendants sought\t to  support\nthe judgment of the High Court on the ground that the  words\nin Explanation (1) to s. 48(1) of the Act must be understood\nin  their  widest  amplitude, so that,\teven  if  a  dispute\nbetween\t a registered society and a non-member did not\tfall\nwithin\tany  of the categories 48(1) (a) to  (e),  it  would\nstill be within the purview of the section by reason of\t the\nExplanation.\nHELD:\t  The  judgment\t of  the High Court  should  be\t set\naside. [858 A]\n(i)  The  scheme  of  s.  48(1)\t is  that  certain  disputes\ntouching  the  business of a registered\t society  should  be\nreferred  to the Registrar and not be taken to civil  courts\nand made the subject matter of prolonged litigation.  Before\nthe  Act  was amended by Bihar Act 16 of  1948\tdisputes  in\nwhich  a Society might be involved with non-members  (except\nas  sureties) were not within the section.   Therefore,\t the\nExplanation to the section as it then stood, made no mention\nof non-members as such and only served to clear up the doubt\nas to whether a dispute was referable to the Registrar\twhen\nthe debt or demand was admitted and the only point at  issue\nwas  the  ability  to pay or the manner\t of  enforcement  of\npayment.   The amendment in 1948, introduced cl. (e)  in  s.\n48(1) by which a dispute in which one of the disputants\t was\nnot  a member of a society was also covered by the  section.\nBut only those non-members who bad disputes with a financing\nbank   were  made  amenable  to\t the  jurisdiction  of\t the\nRegistrar,  and\t in the present case the Society was  not  a\nfinancing  bank.   Therefore cl. (e) would not\tapply.\t Nor\nwould the amended Explanation apply, because the Explanation\nhad  to include non-members after the insertion of  category\n(e) in a. 48(1), but, by such inclusion, the Explanation did\nnot  widen the scope of s. 48(1) so as to include claims  by\nsocieties  against  all non-members ,even if they  were\t not\nincluded in cl. (e).  The Explanation cannot be read\n 849\nas  adding a new head to the categories under s. 48 (1)\t (a)\nto  (e) of disputes which may be referred to the  Registrar.\nIt  must be read only so as to harmonise with and  clear  up\nany ambiguity in the main section. [854 B, E.H; 855 A-C]\n<a href=\"\/doc\/1993513\/\">Sagauli\t Sugar\tWorks (Pw.) Ltd. v. Asstt.   Registrar,\t Co-<\/a>\noperative  Societies, Motihari, [1962] Supp. 3\tS.C.R.\t804,\nfollowed.\n(ii) Because the signature of the 6th defendant was  forged,\nthere never was any mandate  by\t the Society  to  the  Bank.\nTherefore,  there  was\tno negligence on  the  part  of\t the\nSociety.  On the Contrary, there was negligence on the\tpart\nof  the Bank in not ascertaining whether the  signatures  on\nthe cheque were genuine and the circumstances attending\t the\nencashment  of the cheque showed conclusively that the\tBank\nwas negligent and some of its officers fraudulent [857 E-G]\nLondon\tJoint  Stock Bank, Ltd. v. Macmillan,  [1918]\tA.C.\n777, referred to.\n\n\n\nJUDGMENT:\n<\/pre>\n<p>CIVIL APPELLATE JURISDICTION : Civil Appeal No. 699 of 1964.<br \/>\nAppeal from the judgment and decree dated April 14, 1961  of<br \/>\nthe Patna High Court in Appeal from Original Decree No.\t 162<br \/>\nof 1955.\n<\/p>\n<p>A.   K. Sen, B. R. L. Iyengar and A. G. Ratnaparkhi, for the<br \/>\nappellants.\n<\/p>\n<p>S.   V.\t Gupte,\t Solicitor-General  and R.  C.\tPrasad,\t for<br \/>\nrespondents Nos.  1 and 2.\n<\/p>\n<p>R.   S:\t Sinha,\t K.  N.\t Srivastava and\t K.  K.\t Sinha,\t for<br \/>\nrespondent No. 7.\n<\/p>\n<p>The Judgment of the Court was delivered by<br \/>\nMitter\tJ. This is an appeal from a judgment and  decree  of<br \/>\nthe Patna High Court on a certificate granted by it.<br \/>\nThe main question in this appeal is, whether the suit out of<br \/>\nwhich this appeal arises was entertainable by a civil court,<br \/>\nin view of the provisions of s. 48(1) read with S. 57 of the<br \/>\nBihar and Orissa Co-operative Societies Act, 1935.   Broadly<br \/>\nspeaking,  s.  48(1)  enumerates  disputes  between  certain<br \/>\nclasses of persons and\/or the societies registered under the<br \/>\nAct  which  have  to be referred to  the  Registrar  of\t Co-<br \/>\noperative  Societies for adjudication and S. 57(1)  provides<br \/>\nthat  no civil court shall have jurisdiction in\t respect  of<br \/>\nany  dispute required by s. 48(1) to be so  referred.\tThis<br \/>\npoint  was not taken in the written statement of any of\t the<br \/>\ndefendants.  The Subordinate Judge decreed the suit  against<br \/>\nseveral\t of the defendants including the Bank of Bihar\tLtd.<br \/>\nOn  appeal,  the  learned Judges of  the  Patna\t High  Court<br \/>\nconcurred, in the main, with the findings of the Subordinate<br \/>\nJudge but gave effect to the contention raised on behalf  of<br \/>\ntwo  of\t the defendant-appellants on the basis of  s.  48(9)<br \/>\nread  with  s. 57 of the Act.  The  appellants\tbefore\tthis<br \/>\nCourt  are the plaintiffs.  The only contesting\t respondents<br \/>\nare the Bank of Bihar Ltd., Madan Mohan Pandit and Babu\t Lal<br \/>\nVarma (defendants 1, 2 and 6 in the suit).\n<\/p>\n<p><span class=\"hidden_text\">850<\/span><\/p>\n<p>In  order to find out whether s. 48(1) embraces the  dispute<br \/>\nbetween\t the  parties in this case, we have to\texamine\t the<br \/>\nfacts out of which this appeal arises.\tThe first appellant,<br \/>\nBihta  Co-operative  Development Cane Marketing\t Union\tLtd.<br \/>\n(hereinafter  referred\tto  as\tthe  Union)  is\t a   society<br \/>\nregistered under the Bihar and Orissa Co-operative Societies<br \/>\nAct, 1935 (hereinafter referred to as the Act).\t The  second<br \/>\nplaintiff was a Secretary of the Union at the time when\t the<br \/>\nsuit  was filed in 1951.  Under a Resolution dated the\t16th<br \/>\nApril,\t1947  of the Executive Committee of the\t Union,\t the<br \/>\ndefendant  No.\t6, Babu Lal Varma, Joint  Secretary  of\t the<br \/>\nUnion  and Ram Janame Varma, defendant No. 7, the  Treasurer<br \/>\nof the Union, were jointly authorised to withdraw moneys  of<br \/>\nthe  Union from the 1st defendant, the Bank of\tBihar  Ltd.,<br \/>\nwith  which it had a running account.  On the 26th  of\tMay,<br \/>\n1948,  defendant No. 6 and defendant No. 7 went to the\tbank<br \/>\nto encase a cheque on behalf of the Union and then they came<br \/>\nto learn that the funds in the account of the Union were not<br \/>\nsufficient to meet the cheque.\tIt appears that on the\t16th<br \/>\nof April, 1948 a sum of Rs. 11,000\/- had been withdrawn from<br \/>\nthe said account by means of a cheque which did not come out<br \/>\nof the cheque book of the Union and that a loose cheque form<br \/>\nsurrendered  by\t an  ex-constituent of the  bank  issued  to<br \/>\nsomeone\t on the 23rd March, 1948 had been converted  into  a<br \/>\ncheque purporting to bear the signatures of defendant No.  6<br \/>\nand defendant No. 7. It is not necessary to state the  facts<br \/>\nin  detail  and\t it  will be sufficient\t to  note  that\t the<br \/>\nspurious  cheque bore the signature of defendant No.  7\t but<br \/>\nthe  purported signature of the defendant No. 6 thereon\t was<br \/>\nfound  to be a forgery at the trial of the  suit.   Criminal<br \/>\nproceedings  were  started  and\t five  defendants  including<br \/>\ndefendants Nos. 6 and 7 were put on trial.  Defendants\tNos.<br \/>\n3,   4\t and  5\t were  employees  of   the   defendant-bank.<br \/>\nUltimately,  however, all the accused were  acquitted.\t The<br \/>\nsuit  was  instituted by the two  plaintiffs  against  seven<br \/>\ndefendants,  all of whom have already been mentioned  except<br \/>\nthe second defendant who was the Manager of the Bank and  in<br \/>\ncharge\tof its affairs and management at the relevant  time.<br \/>\nThe cause of action for the suit as against defendants 3  to<br \/>\n7  was\tthat  they, in collusion  and  conspiracy  with\t one<br \/>\nanother had authorised an illegal withdrawal of Rs. 11,000\/-<br \/>\nout of funds of the Union lying with the bank.\tThe bank was<br \/>\nsought to be made liable on the ground that it was a trustee<br \/>\nfor  the  Union\t and had abused the trust  by  allowing\t the<br \/>\namount\tin  question  to  be  embezzled\t through  its  gross<br \/>\nnegligence.   All the defendants put in written\t statements,<br \/>\nsome  doing so jointly while others did so individually.   A<br \/>\nlarge number of witnesses were examined and the\t Subordinate<br \/>\nJudge came to the conclusion that the cheque in question was<br \/>\na  forged and fabricated document and that defendants  4,  5<br \/>\nand  7 acting in collusion and conspiracy with\tone  another<br \/>\nhad  withdrawn the sum of Rs. 11,000\/- from the\t plaintiff&#8217;s<br \/>\naccount\t with  the bank fraudulently by means  of  the\tsaid<br \/>\nforged cheque.\tHe, however, thought that<br \/>\n<span class=\"hidden_text\"> 851<\/span><br \/>\nthere was no sufficient evidence against defendants 3 and  6<br \/>\nand  passed a decree as against defendants 1, 2, 4, 5 and  7<br \/>\njointly.   Defendants 1 and 2 only went up in appeal to\t the<br \/>\nPatna High Court.  The High Court agreed with the finding of<br \/>\nthe  Subordinate  Judge\t that defendants 4,  5\tand  7\twere<br \/>\nparties to the conspiracy resulting in the withdrawal of the<br \/>\nsum  of Rs. 11,000\/-, but absolved the defendant No. 2\tfrom<br \/>\nany liability on the ground of negligence.<br \/>\nBefore the High Court, a further contention was put  forward<br \/>\non  behalf of the bank that even if the bank  was  otherwise<br \/>\nliable for the negligence of its employees, it should not be<br \/>\nheld  to be liable because defendants 6 and 7 who  were\t the<br \/>\nagents\tof  the Union were negligent and  dishonest  in\t the<br \/>\ndischarge  of the duty entrusted to them by the Union.\t The<br \/>\nHigh Court, on an examination of the evidence, found  itself<br \/>\nunable\tto  hold that there was any negligence\tor  lack  of<br \/>\nreasonable precaution on the part of the Union.\t It  further<br \/>\nheld  that  Ram Janame Varma may have been a  party  to\t the<br \/>\nconspiracy  which culminated in the withdrawal of the  money<br \/>\nthrough the disputed cheque, but the Union could not be said<br \/>\nto  be negligent or lacking in reasonable precaution  merely<br \/>\nbecause of that.\n<\/p>\n<p>Having\tfound in favour of the plaintiffs on the  merits  of<br \/>\nthe  case, the High Court allowed the appeal of the bank  on<br \/>\nthe  ground  that the jurisdiction of the  civil  court\t was<br \/>\nousted by the combined operation of s. 48(9) read with s. 57<br \/>\nof  the Act.  There is no controversy before us that if\t the<br \/>\ndispute\t in the suit is covered by s. 48(1) it could not  be<br \/>\nagitated  in  a civil court but had to be  referred  to\t the<br \/>\nRegistrar  of  Co-operative Societies.\t It  is,  therefore,<br \/>\nnecessary to, set out the relevant portion of s. 48(1) which<br \/>\nreads as follows:-\n<\/p>\n<blockquote><p>\t      &#8220;48. (1) If any dispute touching the  business<br \/>\n\t      of a registered society (other than a  dispute<br \/>\n\t      regarding\t disciplinary  action taken  by\t the<br \/>\n\t      society  or its managing; committee against  a<br \/>\n\t      paid servant of the society) arises-\n<\/p><\/blockquote>\n<blockquote><p>\t      (a)   amongst  members, past members,  persons<br \/>\n\t      claiming\tthrough\t members,  past\t members  or<br \/>\n\t      deceased member and sureties of members,\tpast<br \/>\n\t      members  or  deceased  members,  whether\tsuch<br \/>\n\t      sureties are members or non-members; or\n<\/p><\/blockquote>\n<blockquote><p>\t      (b)   between  a member, past member,  persons<br \/>\n\t      claiming\tthrough\t a member,  past  member  or<br \/>\n\t      deceased member, or sureties of members,\tpast<br \/>\n\t      members  or  deceased  members,  whether\tsuch<br \/>\n\t      sureties\tare members or non-members, and\t the<br \/>\n\t      society,\t its  managing\tcommittees  or\t any<br \/>\n\t      officer, agent or servant of the society; or\n<\/p><\/blockquote>\n<blockquote><p>\t      (c)   between  the  society  or  its  managing<br \/>\n\t      committee\t and  any past or  present  officer,<br \/>\n\t      agent or servant of the society; or<br \/>\n<span class=\"hidden_text\">\t      852<\/span>\n<\/p><\/blockquote>\n<blockquote><p>\t      (d)   between   the  society  and\t any   other<br \/>\n\t      registered<br \/>\n\t      society;\t or\n<\/p><\/blockquote>\n<blockquote><p>\t      (e)   between  a\tfinancing  bank\t  authorised<br \/>\n\t      under  the  provisions of sub-section  (1)  of<br \/>\n\t      section 16 and a person who is not a member of<br \/>\n\t      a\t registered society such disputes  shall  be<br \/>\n\t      referred to the Registrar:\n<\/p><\/blockquote>\n<p>Provided  that no claim against a past member or the  estate<br \/>\nof  a deceased member shall be treated as a dispute  if\t the<br \/>\nliability  of  the  past  member or of\tthe  estate  of\t the<br \/>\ndeceased  member has been extinguished by virtue of  section<br \/>\n32 or section 63.\n<\/p>\n<p>\t      Explanation-(1)\tA  claim  by  a\t  registered<br \/>\n\t      society for any debt or demand due to it\tfrom<br \/>\n\t      a\t member,  nonmember,  past  member  or\t the<br \/>\n\t      nominee,\their  or legal representative  of  a<br \/>\n\t      deceased member or non-member or from sureties<br \/>\n\t      of members, past members or deceased  members,<br \/>\n\t      whether  such  sureties are  members  or\tnon-\n<\/p>\n<p>\t      members,\tshall  be  a  dispute  touching\t the<br \/>\n\t      business of the society within the meaning  of<br \/>\n\t      this  sub-section\t even in case such  debt  or<br \/>\n\t      demand is admitted and the only point at issue<br \/>\n\t      is  the  ability\tto  pay\t or  the  manner  of<br \/>\n\t      enforcement of payment.\n<\/p>\n<p>It  will  be  noticed  that not\t all  disputes\tin  which  a<br \/>\nregistered -society may be involved are within the  mischief<br \/>\nof  the\t section.  Assuming that the dispute  in  this\tcase<br \/>\ntouches\t the  business of the Union which  is  a  registered<br \/>\nsociety,  the question is: is it one which ,comes under\t any<br \/>\nof  the heads mentioned in sub-cls. (a) to (e) of  the\tsub-<br \/>\nsection?   Sub-cl.  (a)\t has  no operation  if\tone  of\t the<br \/>\ndisputants is the society itself.  So far as sub-cl. (b)  is<br \/>\nconcerned,  a dispute between the society and  a  non-member<br \/>\nwould  only fall within this clause if the non-member was  a<br \/>\nsurety\tof a member.  Cl. (c) can have no  operation  unless<br \/>\none  party  to the dispute was a past  or  present  officer,<br \/>\nagent  or servant of the society.  Clause (d) is  restricted<br \/>\nto  disputes  between two societies.  Clause (e)  which\t was<br \/>\nintroduced by way of an amendment in 1948 (Bihar Act XVI  of<br \/>\n1948) would certainly include a dispute in which one of\t the<br \/>\ndisputants  is not a member of the society, but it  is\tonly<br \/>\noperative when the other party to the dispute is a financing<br \/>\nbank authorised under the provisions of sub-s. (1) of s. 16.<br \/>\nThe  definition\t of &#8220;financing bank&#8221; was  included  for\t the<br \/>\nfirst  time  in the Act by s. 2 of  the\t Bihar\tCo-operative<br \/>\nSocieties  Act\tXVI  of\t 1948.\t Under\tthe  definition,   a<br \/>\n&#8216;financing  bank&#8217;  means  a registered\tsociety\t whose\tmain<br \/>\nobject\tis  to\tmake  advances in  cash\t or  kind  to  other<br \/>\nregistered  societies  or  to  agriculturists  etc.   It  is<br \/>\nnobody&#8217;s case that the dispute in this case is one between a<br \/>\nfinancing  bank and a non-member.  The question then  arises<br \/>\nwhether the first Explanation to the section widens the<br \/>\n<span class=\"hidden_text\"> 853<\/span><br \/>\nscope  of  sub-s. (1) of s. 48 so as to\t include  claims  by<br \/>\nregistered  societies against non-members even if  the\tsame<br \/>\nare  not covered by clause (e).\t It is to be noted that\t the<br \/>\nword &#8220;non-member&#8221; was not to be found in the Explanation  to<br \/>\nthe  section before its Amendment of&#8217; 1948.  The history  of<br \/>\nlegislation with regard to co-operative societies in general<br \/>\nand   Bihar  and  Orissa  Co-operative\tSocieties   Act\t  in<br \/>\nparticular  was\t traced in a decision of  this\tCourt  i.e.,<br \/>\nSagauli\t Sugar Works (Private) Ltd. v. Assistant  Registrar,<br \/>\nCo-operative Societies, Motihari &amp; Others(1).  In that case,<br \/>\nthere  was  a  dispute\tbetween\t the  appellant,  a  company<br \/>\nregistered  under  the Indian Companies Act and\t a  society.<br \/>\nregistered under the Act.  The Society claimed a sum of\t Rs.<br \/>\n1,20,809\/-  from  the appellant company\t as  commission\t and<br \/>\ninterest for the supply of sugar cane and referred the\tsame<br \/>\nto  the first respondent.  The preliminary objection of\t the<br \/>\nappellant  to  the jurisdiction of the first  respondent  to<br \/>\nadjudicate  upon the dispute was over-ruled.  The  appellant<br \/>\nwent  to the Patna High Court under Articles 226 and 227  of<br \/>\nthe  Constitution  for\tquashing the  orders  of  the  first<br \/>\nrespondent.  The High Court following a previous decision in<br \/>\nUnion of India v. Registrar, Co-operative Societies Patna(2)<br \/>\nsummarily dismissed the application.  Before this Court,  in<br \/>\nappeal,\t it  was contended that the dispute was\t beyond\t the<br \/>\npale  of s. 48 and as such, not referable  thereunder.\t The<br \/>\nCourt  took into consideration the various amendments  which<br \/>\nwere introduced by the Act of 1948 and observed:\n<\/p>\n<blockquote><p>\t      &#8220;Before  the amendments introduced by the\t Act<br \/>\n\t      of   1948,   the\tdisputes  which\t  could\t  be<br \/>\n\t      entertained  by  the Registrar  were  disputes<br \/>\n\t      among members, past members or their heirs, or<br \/>\n\t      their  sureties or between a society  and\t its<br \/>\n\t      officers,\t agents\t or servants, or  between  a<br \/>\n\t      society\tand   other   registered   societies<br \/>\n\t      (without\t meaning   to\tekhaust\t  all\t the<br \/>\n\t      categories).   But before the amendments,\t one<br \/>\n\t      who  was\tnot a member of society or  was\t not<br \/>\n\t      claiming through a member or a past member  or<br \/>\n\t      a\t deceased member, or was not a surety  of  a<br \/>\n\t      member  or a deceased member, was not  subject<br \/>\n\t      to the jurisdiction of the Registrar under  s.\n<\/p><\/blockquote>\n<blockquote><p>\t      48.   That  is to say, any dispute  between  a<br \/>\n\t      society  or  its\tmembers,  past\tmembers\t  or<br \/>\n\t      deceased\tmembers or sureties of such  members<br \/>\n\t      on  the one hand and non-members on the  other<br \/>\n\t      was not within the purview of the section,  so<br \/>\n\t      that  the\t appellant company, which is  not  a<br \/>\n\t      registered society or a member of a registered<br \/>\n\t      society, could not have its claim, or a  claim<br \/>\n\t      against  it by a registered society,  referred<br \/>\n\t      to  the  Registrar for  decision,\t under\tthis<br \/>\n\t      section.&#8221;\n<\/p><\/blockquote>\n<p>According  to  the  Court,  the\t effect\t of  the  amendments<br \/>\nintroduced  by\tthe  Act  of 1948 was &#8220;that  a\tclaim  by  a<br \/>\nfinancing bank against a<br \/>\n(1) (1962] Supp. 3 S.C.R, 804-A.I.R. 1962 S.C. 1367.<br \/>\n(2) I.L.R. 40 Patna, 7.\n<\/p>\n<p><span class=\"hidden_text\">854<\/span><\/p>\n<p>non-member to whom the former had made an advance in cash or<br \/>\nkind,  with  the sanction of the Registrar under  s.  16(1),<br \/>\nwould be entertainable by the Registrar, on a reference, but<br \/>\nthat  does  not\t mean  that a claim  which  is\tnot  of\t the<br \/>\ndescription referred to in s. 16(1) read with s. 2(c), by  a<br \/>\nregistered  society  against any nonmember, who\t is  not  an<br \/>\nagriculturist,\tis within the purview of s. 48(1) read\twith<br \/>\nthe Explanation.  The Explanation cannot be read as adding a<br \/>\nnew head to the categories (a) to (e) under s. 48(1) of dis-<br \/>\nputes  which may be referred to the Registrar.\t Originally,<br \/>\nthe  Explanation had been added only to make it\t clear\tthat<br \/>\neven if a debt or demand is due and the only point at  issue<br \/>\nis  the\t ability  to pay or the\t manner\t of  enforcement  of<br \/>\npayment\t the  dispute would come within the purview  of\t the<br \/>\nmain  section 48(1).  The addition of the word\t&#8216;non-member&#8217;<br \/>\nby  the Amending Act of 1948, to the First  Explanation\t has<br \/>\nnot  enlarged the scope of the main section 48(1) so  as  to<br \/>\nmake all kinds of disputes between a registered society\t and<br \/>\na non-member cognizance by the Registrar, thus excluding the<br \/>\njurisdiction of the ordinary courts.&#8221;\n<\/p>\n<p>Appearing for the respondents 1 and 2, the learned Solicitor<br \/>\nGeneral\t in  effect  contended-\t that  the  above   decision<br \/>\nrequired  reconsideration and the words in  the\t Explanation<br \/>\nmust be understood in their widest amplitude so that even if<br \/>\na  dispute  between a registered society  and  a  non-member<br \/>\nwhich  did not fall within any of the categories (a) to\t (e)<br \/>\nit  would  still  be within the purview of  the\t section  by<br \/>\nreason of the Explanation.\n<\/p>\n<p>We find ourselves unable to accept this contention.   Before<br \/>\nthe  amendments introduced in 1948, the Explanation  to\t the<br \/>\nsection\t made no mention of non-members and non-members\t had<br \/>\nto  be included in the Explanation because of the  inclusion<br \/>\nof this class of persons in category (e) of sub-s. (1) of s.\n<\/p>\n<p>48.   The Explanation must be read so as to  harmonise\twith<br \/>\nand  clear up any ambiguity in the main section.  It  should<br \/>\nnot  be so construed as to widen the ambit of  the  section.<br \/>\nThe  scheme  of sub-section (1) of s. 48 seems\tto  be\tthat<br \/>\ncertain\t disputes  touching  the business  of  a  registered<br \/>\nsociety\t should\t not be taken to civil courts and  made\t the<br \/>\nsubject\t matter\t of prolonged litigation.   The\t legislature<br \/>\ntook pains to specify the persons whose disputes, were to be<br \/>\nsubject\t matter of reference to the Registrar.\t Non-members<br \/>\ndid  not  come into the picture at all.\t  Non-members  other<br \/>\nthan  officers,\t agents or servants of the  society  do\t not<br \/>\nfigure in sub-cls. (a) to (d) except as sureties of members.<br \/>\nBy sub. cl. (e) only those non-members who had disputes with<br \/>\na  financing bank authorised under the provisions of  sub-s.<br \/>\n(1)  of s. 16 were made amenable to the jurisdiction of\t the<br \/>\nRegistrar.   It\t was  probably\tthought\t desirable  in\t the<br \/>\ninterest  of  the financing bank which\tmight  otherwise  be<br \/>\nfaced  with  litigation in a civil court in respect  of\t its<br \/>\nordinary    day-to-day\t transactions\tof    advances\t  to<br \/>\nagriculturists<br \/>\n<span class=\"hidden_text\"> 855<\/span><br \/>\nwho  were non-members that disputes between the society\t and<br \/>\nthis  class of persons should be quickly  and  inexpensively<br \/>\nadjudicated upon by the Registrar.  Before the amendment  of<br \/>\n1948,  the Explanation only served to clear up the doubt  as<br \/>\nto whether a dispute was referable to the Registrar when the<br \/>\ndebt or demand was admitted and the only point at issue\t was<br \/>\nthe ability to pay or the manner of enforcement of  payment.<br \/>\nAs already pointed out by this Court, the Explanation had to<br \/>\ninclude non-members after the. insertion of category (e)  in<br \/>\nsub-s.\t(1) of s. 48.  The purpose of the Explanation  never<br \/>\nwas  to\t enlarge the scope of sub-s. (1) of s.\t48  and\t the<br \/>\naddition  of  category\t(e)  to\t that  sub-section  and\t the<br \/>\ninclusion of non-members in the Explanation cannot have that<br \/>\neffect.\n<\/p>\n<p>In our opinion, the High Court was not justified in allowing<br \/>\nthe appeal of the bank on that ground.\n<\/p>\n<p>The  learned  Solicitor General then sought to\tsupport\t the<br \/>\njudgment  of the High Court on the ground that its  decision<br \/>\non the merits of the case was not correct.  His argument  in<br \/>\nsubstance  was that even though there was negligence on\t the<br \/>\npart  of the bank and its employees, the  plaintiff  society<br \/>\nwas not altogether free from blame or negligence in that but<br \/>\nfor the part played by at least one of its employees in\t the<br \/>\nmatter of encashment of the cheque for Rs. 11,000\/the  fraud<br \/>\ncould not have been perpetrated.  It was argued that if both<br \/>\nparties were negligent or blameworthy, the plaintiffs&#8217; claim<br \/>\nought not to succeed.  He referred us to the judgment of the<br \/>\nHouse  of  Lords  in London Joint  Stock  Bank,\t Limited  v.<br \/>\nMacmillan &amp; Arthur(1) in support of his argument.  The facts<br \/>\nin that case were as follows.\n<\/p>\n<p>The plaintiffs, Messrs.\t Macmillan and Arthur brought a suit<br \/>\nfor a declaration that the defendant, the London Joint Stock<br \/>\nBank, was not entitled to debit the plaintiffs with a cheque<br \/>\nfor  pound  120.   The\tplaintiffs had\tin  their  employ  a<br \/>\nconfidential  clerk who had been with them for\tsome  years.<br \/>\nThey  left to him the copying of their books and filling  up<br \/>\ncheques for signatures.\t The usual practice in the office of<br \/>\nthe  plaintiffs seems to have been for the clerk to  present<br \/>\ncheques\t for signatures to get petty cash usually for  pound\n<\/p>\n<p>3. On a certain day, the clerk made out a cheque for pound 2<br \/>\nand  asked one of the partners to sign it which the  partner<br \/>\ndid.   As  the\tclerk  did not turn up\tthe  next  day,\t the<br \/>\npartners became suspicious and went to the bank.  There they<br \/>\nlearnt\tthat the clerk had presented a cheque for pound\t 120<br \/>\nwhich  had  been  paid.\t  The clerk  was  a  thief  and\t had<br \/>\nabsconded  with\t the money. :The learned trial\tJudge  found<br \/>\nthat  at  the  time when the cheque  was  presented  to\t the<br \/>\npartner\t for  signature the figure &#8216;2&#8217; was  written  thereon<br \/>\nwith enough space on either side for insertion of additional<br \/>\nfigures\t and  the  clerk had  taken  advantage\tthereof\t and<br \/>\naltered the figure &#8216;2&#8217; to 120.\tThe<br \/>\n(1)  [1918] A.C. 777.\n<\/p>\n<p><span class=\"hidden_text\">856<\/span><\/p>\n<p>question  was, whether the plaintiffs had been so  negligent<br \/>\nwith regard to the cheque that their action against the bank<br \/>\nshould\tfail.\tThe trial Judge found that  the\t respondents<br \/>\nwere not guilty of any negligence in the mode of signing the<br \/>\ncheque and assuming that they had been guilty of negligence,<br \/>\nthe negligence was not the proximate cause of the loss.\t  He<br \/>\ntherefore ordered judgment to be entered for the plaintiffs.<br \/>\nThe  Court  of\tAppeal\tupheld\tthis  decision.\t  This\twas,<br \/>\nhowever,  reversed  in appeal to the House of  Lords.\tLord<br \/>\nFinlay L. C. observed:\n<\/p>\n<blockquote><p>\t      &#8220;As  the customer and the banker are  under  a<br \/>\n\t      contractual   relation  in  this\tmatter,\t  it<br \/>\n\t      appears  obvious that in drawing a cheque\t the<br \/>\n\t      customer is bound to take usual and reasonable<br \/>\n\t      precautions  to  prevent forgery.\t  Crime,  is<br \/>\n\t      indeed,  a very serious matter, but every\t one<br \/>\n\t      knows  that  crime is not\t uncommon.   If\t the<br \/>\n\t      cheque is drawn in such a way as to facilitate<br \/>\n\t      or almost invite an increase in the amount  by<br \/>\n\t      forgery  if  the cheque should &#8216;get  into\t the<br \/>\n\t      hands of a dishonest person, forgery is not  a<br \/>\n\t      remote  but  a  very  natural  consequence  of<br \/>\n\t      negligence of this description.&#8221;<br \/>\n\t      The  learned Lord Chancellor observed  further<br \/>\n\t      at page 795:\n<\/p><\/blockquote>\n<blockquote><p>\t      &#8220;Of  course  the\tnegligence must\t be  in\t the<br \/>\n\t      transaction itself, that is, in the manner  in<br \/>\n\t      which  the  cheque is drawn.  It would  be  no<br \/>\n\t      defence to the banker, if the forgery had been<br \/>\n\t      that of a clerk of a customer, that the latter<br \/>\n\t      had  taken the clerk into his service  without<br \/>\n\t      sufficient   inquiry  as\tto  his\t  character.<br \/>\n\t      Attempts\thave often been made to\t extend\t the<br \/>\n\t      principle\t of  Young  v. Grote,  4  Bing.\t 253<br \/>\n\t      beyond the case of negligence in the immediate<br \/>\n\t      transaction, but they have always failed.&#8221;\n<\/p><\/blockquote>\n<p>According  to  the learned Lord\t Chancellor,  leaving  blank<br \/>\nspaces\ton  either  side of the figure\t&#8216;2&#8217;  in\t the  cheque<br \/>\namounted  to a clear breach of duty which the customer\towed<br \/>\nto the banker.\tThe learned Lord Chancellor said:\n<\/p>\n<blockquote><p>\t       &#8220;If  the\t customer chooses to  dispense\twith<br \/>\n\t      ordinary\tprecautions because he has  complete<br \/>\n\t      faith in his clerk&#8217;s honesty, he cannot  claim<br \/>\n\t      to  throw\t upon  the  banker  the\t loss  which<br \/>\n\t      results.\tNo one can be certain of preventing,<br \/>\n\t      forgery,\tbut  it is a very  simple  thing  in<br \/>\n\t      drawing  a  cheque  to  take  reasonable\t and<br \/>\n\t      ordinary\tprecautions  against  forgery.\t  If<br \/>\n\t      owing to the neglect of such precautions it is<br \/>\n\t      put into the power of any dishonest person  to<br \/>\n\t      increase\tthe amount by forgery, the  customer<br \/>\n\t      must bear the loss as between himself and\t the<br \/>\n\t      banker.&#8221;\n<\/p><\/blockquote>\n<p><span class=\"hidden_text\">\t       857<\/span><\/p>\n<p>According  to Lord Shaw the responsibility of  what  happens<br \/>\nbetween\t the  signature and presentation of  the  cheque,  a<br \/>\nperiod wholly in the customer&#8217;s control, lies entirely\twith<br \/>\nhim.\n<\/p>\n<p>The principle of this case cannot help the respondent before<br \/>\nus. If the signatures on the cheque had been genuine so that<br \/>\nthere  was a mandate by the customer to the banker  but\t the<br \/>\ncheque was somehow got hold of by an unauthorised person and<br \/>\nencashed by him, the bank might have had a good defence.  If<br \/>\nthe signatures on the cheque or at least that of one of\t the<br \/>\njoint  signatories to the cheque are not or is not  genuine,<br \/>\nthere  is no mandate on the bank to pay and the question  of<br \/>\nany negligence on the part of the customer, such as, leaving<br \/>\nthe  cheque  book  carelessly so that a\t third\tparty  could<br \/>\neasily\tget hold of it would afford no defence to the  bank.<br \/>\nAccording  to Halsey&#8217;s Laws of England (3rd Edition) Vol.  2<br \/>\narticle 380 :\n<\/p>\n<blockquote><p>\t      &#8220;A  document  in\tcheque\tform  to  which\t the<br \/>\n\t      customer&#8217;s name as drawer is forged or  placed<br \/>\n\t      thereon without authority is not a cheque, but<br \/>\n\t      a\t  mere\tnullity.   Unless  the\tbanker\t can<br \/>\n\t      establish\t adoption  or  estoppel,  he  cannot<br \/>\n\t      debit  the customer with any payment  made  on<br \/>\n\t      such document.&#8221;\n<\/p><\/blockquote>\n<p>In this case, the finding is that one of the signatures\t was<br \/>\nforged\tso that there never was any mandate by the  customer<br \/>\nat  all to the banker and the question of negligence of\t the<br \/>\ncustomer  in between the signature and the  presentation  of<br \/>\nthe  cheque never arose.  Not only was there  negligence  on<br \/>\nthe  part  of  the banker in not  ascertaining\twhether\t the<br \/>\nsignatures  on\tthe cheque were genuine,  the  circumstances<br \/>\nattending  the\tencashment of the cheque  show\tconclusively<br \/>\nthat  the  banker  was negligent and some  of  its  officers<br \/>\nfraudulent  right from the beginning.  The cheque  form\t did<br \/>\nnot come out of the customer&#8217;s cheque book.  A loose  cheque<br \/>\nform  returned by ,in ex-constituent had been used  for\t the<br \/>\npurpose of making out a cheque purported to be drawn by\t the<br \/>\ncustomer.  The entries in the register for the issue of such<br \/>\nloose  forms  were  so suspicious that it  is  difficult  to<br \/>\nbelieve\t that the employees of the bank concerned  with\t the<br \/>\nencashment of the cheque were acting bonafide.\tThere was no<br \/>\nnegligence  on the part of the customer according  to  whose<br \/>\nresolution,  the  cheque  had to be signed  jointly  by\t two<br \/>\npersons.  The fraud could only be perpetrated because of the<br \/>\ncomplicity of the employees of the bank, no doubt, with\t the<br \/>\nhelp of one of the officers of the Union.  The dishonesty of<br \/>\na  particular  officer of the Union was\t not  the  proximate<br \/>\ncause of the loss to the bank.\tIn our opinion, the case  of<br \/>\nG. C. Kurbar &amp; Another v. Balaji Ramji Dange(1) referred  to<br \/>\nin the judgment of the High Court has no application to\t the<br \/>\nfacts of this case.\n<\/p>\n<p>(1) A. 1. R. 1941 Bombay 274.\n<\/p>\n<p>M17Sup.CI\/66-10<br \/>\n<span class=\"hidden_text\">858<\/span><br \/>\nIn  the\t result, the appeal succeeds, the  judgment  of\t the<br \/>\nPatna  High Court is set aside and that of  the\t Subordinate<br \/>\nJudge restored.\t The appellants do not want a decree against<br \/>\nrespondent  No. 7. Consequently, there will be no decree  as<br \/>\nagainst the said respondent.  The other respondents must pay<br \/>\nthe costs of this appeal.\n<\/p>\n<p>V.P.S.\n<\/p>\n<p>\t\t\t\t\t    Appeal allowed.\n<\/p>\n<p><span class=\"hidden_text\">859<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Supreme Court of India Bihta Co-Operative Development &#8230; vs The Bank Of Bihar &amp; Ors on 12 October, 1966 Equivalent citations: 1967 AIR 389, 1967 SCR (1) 848 Author: G Mitter Bench: Mitter, G.K. PETITIONER: BIHTA CO-OPERATIVE DEVELOPMENT CANE MARKETING UNION LTD., Vs. RESPONDENT: THE BANK OF BIHAR &amp; ORS. DATE OF JUDGMENT: 12\/10\/1966 BENCH: [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[30],"tags":[],"class_list":["post-156709","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.3 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Bihta Co-Operative Development ... vs The Bank Of Bihar &amp; Ors on 12 October, 1966 - Free Judgements of Supreme Court &amp; High Court | Legal India<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.legalindia.com\/judgments\/bihta-co-operative-development-vs-the-bank-of-bihar-ors-on-12-october-1966\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Bihta Co-Operative Development ... vs The Bank Of Bihar &amp; 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