CHAPTER IX

Winding up of Co-operative Societies

57. Winding up of co-operative societies. -(1) Ifthe Registrar, after an in-

quiry has been held under Sections 50, or an inspection has been made under
Section 51, or on receipt of an application made by not less than, three- fourths
of the members of a co-operative society, is of opinion that the society ought
to be wound up, he may issue an order directing it to be wound up.

of his own motion make an order directing the wind-

(2) The Registrar may
ing up ofa co-operative society
.

society that the society

registration ofthe
(a) where it is a condition ofthe has
members and the number of members
shall consist of at least ten
or
been reduced to less than ten;

RRR 409(P&H).
Mathra Dass v. State of Punjab, 1984
2 RRR 409(P&H). 417(P&H).
iathra Dass v. State of Punjab., 1984 Society Ltd.,
1988(2) RRR
Building
3 D v i V. Kalka Co-operative
Housing
 Societies Act, 1961 Section 57
352 Punjab Co-operative

where the co-operative society

has not king or
commenced working or has
1
(b) accordance with co-operative principles.
ceased to function in

order for the Winding up of a co-operati.

(3) Registrar may cancel an
The
case where, in his opinion, the society should Con
con-
society, at any time, in any
tinue to exist.

by registered post of the

(4) A copy ofsuch order shall be communicated the society is a
so-
of which member,
ciety and to the financing institutions, if any.,
COMMENTARY

1 . Scope.
of Order of Assistant
2 . Winding up of Co-operative Society Validity
-

Registrar.
3 . Placing of Co-operative Society under liquidation - Justification.

O4. Order for winding up ofa society - Grounds to be stated.

5 . Power of Assistant Registrar, Order of winding up of a society.

O6. Companies Act.
7 . Winding up of Co-operative Society-Analogy of winding up
contained in Companies Act cannot be applied.
8. Winding up of a Co-operative Bank.
9 . Matters connected with dissolution of society Civil Court's
jurisdiction barred.
10. Winding up by Assistant Registrar.
11. Money suit against Co-operative Society
12. Order of winding up passed by Assistant Registrar
powers of Registrar Amounts to the Order of Registrar.
exercising
O13. Co-operative Society ordered to be wound up - State Government
can only recover amount from assets of society.
14. Article 21 of Constitution Not -

applicable.
15. Liquidation order allegation
of mala fides.
16. Liquidator not a Public Officer.
17. "Member".

1.Scope.- Sale effected by the liquidator. The procedure indicated

was not followed. Whether the sale in chapter VIl of the rules
aside at the instance of
should be set aside. It was held that the sale cannot be set
one member only.'
2. Winding up of Co-operative Society
Where Managing Committee of Co-operativeValidity of Order of Assistant Registrar.
pointed and enquiry into the affairs of Society suspended and Administrator a
Co-operative Society revealing serious s in
iregularnne
Kasturi Lal v. State of Punjab, 1981 PLJ 457.
 1961 Section 57
Punjab Co-operative Societies Act. 353

its working. Show-cause notice issued to Co-operative Society. Administrator agreeing with
Assistant Registrar that Co- operative Society should be wound up. Order passd by Assistant
for winding up of Co-operative Society Legal and eminently just.
-

Registrar
3. Placing of Co-operative Society under liquidation - Justification. The reasons, facts
and circumstances which justify placing of Co-operative Society under liquidation must be re

corded
stated. An order passed under Sec-
4.Order for winding up of a society Grounds to be
-

tion 57 of the Punjab Co-operative Societies Act by the Assistant Registrar, CO-operative So-
cieties exereising the powers of Registrar for winding up a society is a quasi-judicial order and
it must by supported by reasons. Similarly the order in appeal passed by the oficer exercising
the powers of the State Government is a quasi-judicial order and must contain succinctly the
reasons for the conclusions arrived at. It is an established principle of law that a quasi-judicial
tribunal must pass a speaking order giving reasons in support of its decision."

5. Power of Assistant Registrar, Order of winding up of a society. - When the Assistant

Registrar is empowered to act as Registrar he can order the winding up of a Co-operative So-
ciety and the order passed by him can be appealed against before the Secretary to the Punjab
Govenment, Co-operative Department and not to the Registrar.
6. Companies Act. - Pro
isions of Co-operative Societies Act are para materia with the pro-
visions of Companies Act- Therefore law laid down by the Courts under the Companies Act
would be applicable to even under the provisions of the Act.
7. Winding up of Co-operative Society - Analogy of winding up contained in Compa-
nies Act cannot be applied. It must be borne in mind that the Co- operative Societies Act
which is a self-contained Act in respect ofthe Co-operative Societies registered under the Act
evolve the procedure for winding up of the societies. It cannot be said that the same procedure
adoptped for the winding up of the company under the Companies Act should be adopted un-
der the Co-operative Societies Act also.

A special procedure has been evolved under the Co-operative Societies Act for the winding
up of the societies. The Co-operative Societies Act provides a special procedure for registra-
tion of societies and also the management of the affairs of the society and winding up ofthe so-
cieties. This is a self- contained Act which deals exclusively with the Co-operative Banks
registered under this Act. Therefore, the analogy of winding up of companies under the Com
panies Act cannot be pressed into service.

The decree holders are to be treated as original creditors and the decretal amount has to be
paid by the Liquidator as per the priorities. To the same effect it was held by Punjab and Hary-
ana High Court. The observations made are reproduced here-in-below:-
It is further the case of the appellants that all the liabilities of the Super Bazar shall be dis-
Rule 63 of the Punjab Co-operative Socie-
charged in accordance with the provisions ofof
ties Act, 1963 read with order of priorities discharge of liabilities prescribed vide

v. State of Punjab, 1984 RRR

22 (Supreme Court).
Jamalpur Agricultural Co-operative Society
Karan Singh v State of Haryana, 1983 PLJ 181 1983 RLR 287 (P&H).
State of Punjab, 7I PLR 718: 1969 CLJ
House Building Society Ltd. v.
he Jyoti Nagar Co-operative
512P&H) 69 PLR 59 SN: 1967 Cur LJ 156(P&H)
Punjab,
Baba Kalyan S1ngh Bedi v. State of Mills General Mills 2010(2)
Ltd. v. Suresh Cotton Oil &
quidator, Malout Co-op Spinning Doc ld
RCRICivil) 469 P&H): Law Finder # 208927Bank Ltd., AlR 1986 AP
244.
The Kolluru Parvathi Co-operative,
, uryanarayana v.
Consumer Store Limited. (Super
2001. (The Central Co-operative
ers Patent Appeal No. 1435 of its liquidator and another) v. Super Bazar, Chand1garh Employees
under liquidation through
a ow
Union and others ), decided on November 22. 2001.
 354 Punjab Co-operative Societies Act, 1961
Section 57
Standing Order 17.32 of the Book of Consolidated Circulars issued by thee Registrar
Co-operative Societies, Punjab, prevalent as on 1.11.1966 whi hich are binding
Union Territory of Chandigarh under the Punjab Re-Organisation Act, 1966on the
notification dated 20.11.1968 whereby all the State Acts, Rules, Orders d d with
Schemes, Notifications or other instructions were adopted by the
stration w.e.f. 1.11.1966. It is also the case of the appellants that Chandigarh aws
authority to discharge liability except in accordance with the prioritiesliquidatormini.
fixed h v d no
istrar, Co-operative Societies. Under the Standing Order 17.32
of the Consolidato
cular of the Co-operative Department, the following line of priorities in the distrir
of assets is prescribed:- Dution
(a) Liquidator expenses
(b) Government dues
(c) Claims of employees in respect of Provident and
security deposit
(d) Pay and other claims of the
employees
(e) Secured creditors (both principal and interest)
(f) Ordinary creditors (principal only)
(g) Interest to ordinary creditors
(h) Share money to the ordinary creditors
i) Any surplus should be disposed of ordered
8. by the Registrar.
Winding up of a Co-operative Bank. In pith and substance
-

the Act deals with

erative Societies".
Though it might trench
upon Banking incidentally, yet it does not "Co-op-
beyond the competence of the State
Legislature. A Co-operative Bank does not cease totake
society. It retains essentially the character be
it
of Co-operative a
tivities of the
Co-operative Society. In fact it is one of the
supplying to its members theSociety.
A Co-operative ac-
various implements of
Society may engage itself in the matter of
ties like fertilizer, seeds and so
on. It
agricultural, industrial or the commodi-
ceive the cash by may also lend the amount in cash to its
way of deposits. In that it members or re-
nevertheless it does not cease to be a
might partake the character ofa bank. But
in such cases it is the co-operative society which is its essential character,
islative competence. The principle of pith and substance that must guide in so,

foundation.
contention of the adjudicating
appellant, therefore, is rejected being without the leg-
any
Part III
of the Banking Regulation Act is
banking companies". Section titled"Suspension
38 which deals of
with winding up ofbusiness and winding up of
under Part IlI. In other words,
Bank is excluded from Banking Companies falls
Banking Regulation Act and ifCo-operative
that be so it is needless being wound up under the
45-A of the to advert to the
Banking Regulation and construe with reference provisions of Section
because by explicit to
non-obstante clause therein,
visions dealing withprovision
under Section (b) of Section
56 itself the
winding up applicability of the pro-
contention and,proceedings
of a
is no merit in the Co-operative
therefore, the same is rejected.
Bank is excluded. Hence there
The argument that the
Reseve Bank has
merely
Co-operative Societies and,requested
to the
Registrar of the and not sanctioned
authority
the essential
ingredient of sanction within the therefore, the same cannot beany reckoned as
Co-operative Societies Act, 1964 is too meaning of Section 115-B (i) of Andhra
therefore, the communication to the fanciful to be appreciated. In our Pradesn
for winding up the Bank Registrar by the Reserve Bank is undoubted view,
and, therefore, nothing, but a sancnou
15-B (i) of the Act. adequately complies with the provisions Sectton
of
In the face
of the words
of the Bank may be made employed in Section 115-B (i) wherein it
'under the
winding up of the proceedings of any provisions of this Act' meaningsays that the winding u
Bank will have to be thereby
done as laid down in
clearly that une
any of the prO
 Societies Ae1, 1961
Punjab Co-operative Section 57
355

visions. theCo-operative
the Socicties Act and the
Registrar that has been provisions being Section 64 of the Act, under
empowered to wind up the Bank the contention
sustain. cannot
Court will be highly
Tnan appellate authority.chary
to
enter into area
The Reserve Bank is of scrutinising the decision of Reserve
tise in
the atter of banking and its affairs to take
matte potential body with its necessary exper-
a

tisedict or interfere unless the decision is proper decision and it is not for this Court
a

mala fide vide the following:

decision reported in Joseph Kuruvilla Velukunnel Reserve
sc 1371, the Supreme, held Bank of India, AIR 1962
v.

.These observations lay down clearly that there be

the legislature may, with reason, think that themay occasions and situations in which
an determination of an
expert executive like the Reserve Bank rather than issue may be left to
Courts withoutto
incurring the
penalty of having the law declared void. The law thus made is
justified on the
expediency arising from the respective opportunities for action. Of course, the ground of
sion of Courts is not exclu-
lightly to be inferred nor lightly to be conceded. The reasonable-
ness of such a law in the total
circumstances will, if challenged, have to be made out to
the ultimate satisfacion of this Court
and it is
reasonable in the individual circumstances thatonly
when this Court considers that it is
the law will be upheld.
Further held
In the present case, in view of the history of the establishment of the Reserve Bank as a
central bank for India, its position as a "Bankers' bank, its control over banking
nies and banking in India, its position as the issuing bank, its power to license compa-
banking
companies and cancel their licences and the numerous other powers, it is unanswerable
that between the Court and the Reserve Bank, the momentous decision to wind up a tot-
tering or unsafe banking company in the interest of the depositors, may reasonably be
left to the Reserve Bank. No doubt, the Court can also, given the time, perform this task.
But the decision has to be taken without delay, and the Reserve Bank already knows in-
timately the affairs of banking companies and has had access to their books and ac-
counts. If the Court were called upon to take immediate action, it wouldalmostalways
be guided by the opinion of the Reserve Bank. It would be impossible for the Court to
reach a conclusion unguided by the Reserve Bank if immediate action was demanded.
of the Reserve Bank is chal
But the law which gives the same position to the opinion
such challenge has no force. The situation that
lenged as unreasonable. In opinion
our a
would
arose in this case is typical
of the occasions on which this extraordinary power
if the is abused by the Re-
normally be exercised, and, as down would already,
we have said power
be the action of the Reserve Bank but not
serve Bank, what will be
struck
an ex post facto
Reserve Bank's action or provision for
the law. An appeal against the to the Central Government will be
necessary. An appeal
finding by the Court is hardly because the Reserve Bank would hardly act with-
appeal from Caesar to Caesar, the Courot would
only an and the finding by
out the c o n c u r r e n c e of
the Central Government examination of
macabre phrase of Raman Nayar,
J., a posotmortem
mean, to borrow the
the corpse of the banking company barred. -

Civil Court's jurisdiction

dissolution of society
-

with of the words "n

9. Matters connected ofa Civil Court thus turns upon the interpretation ifthe
ne question ofjurisdiction the registered society." Now,
connected with the dissolution of hands and that he was know

cpect of any matter the liquidator had ample funds in hiswould have been a little diftfer
were that the question
hdintiff's case to the plaintiff,
money colluded amongst themselves.
Ingly dng payment of that defendant had money and,
ent is alleged by the plaintiff is including the plaintiff's wanted tne
h u t what funds of the society m e a n s that he
t they had already ken away the the liquidator. This
and
against thenm
there
I E wanted to decree
AlR 1986
AP 244.
Bank Ltd.,
Co-operative
Parvathi
Kolluru
B Sur
ddyana
v. 1453 The
358 Punjab Co-operative
Societies Act, 1967 Section S8
Government only
can proceed to
to .recover:amount
Society. The State
fixed on Co-operative proceedings."
Society in liquidation
from assets of Co- operative Article 21 ofthe Constitt.
Constitution Not applicable. - tion has ono a
Articl
of case of a person. This
only a
14. Article 21 to the rson. Article
Bodies and it applies icy dea
deas
The liquidation of Society,which
a
plication to Co-operative liberty.
and personal CO.
with protection of life life and personal liberty.
to "deprivation of
porate, cannot be equated
has been held that wheneve
of mala fides. It mala fides
-

15. Liquidation order allegation

there must be specific
allegations together ewith
ether
are alleged regarding
liquidation order,
with clear proof of same. Mala fides
sufi
cannot be accepted anaction
e
cient materials Mala fides the malice in fact is concerned
i.e., (1) of fact and (2) of law. So far as 0es
be oftwo kinds, of malice in law is concermed
But so far as question
not require any further explanation. manner in making an ord.
applies his mind and acts in a reasonable ler re-
competent authority be proved."
garding liquidation, no Malafides
can

16. Liquidator not a Public is

liquidator Act."
Officer.-A appointed by the Registrar of Co-on.
Public Officer under the
erative Societies, he is not a
section means a member at the time
17.Member". -
"Member" mentioned in this
Word
and ajoint family is its members ny
the dissolution ofthe society." Ifa society is liquidated
of will be liable in the liquidation proceedings.
member said
of the joint family

has made an order under Section

58. Liquidator. (1) Where the Registrar
-

he may appoint a liquidator

57 for the winding up of a co-operative society,
for the purpose and fix his remuneratioon.

or under his con-

(2) A liquidator shall, on appointment, take into his custodythe
trol the property, effects and actionable claims to which society is or
as he may deem necessary or
appears to be entitled and shall take such steps ef-
expedient, to prevent loss or deterioration of, or damage to such property, be
fects and claims. He may carry on the business of the society so far as may
necessary with the previous approval of the Registrar.

(3) Where an appeal is preferred under Section 68 an order of winding up ot

a co-operative society made under Section 57 shall not operate thereafter un
the order is confirmed in the appeal:

of
Provided that the liquidator shall continue to have custody or contro
ion
the property effects and actionable claims mentioned in sub- S
(2) and have authority to take the steps referred to in that sub- secu

1 Chanan Ram v. State of Haryana, 1985 RRR 129(P&H).

2 S. Nageshwar Rao v. Govt. of A.P., AIR 1978 AP
121(FB).
3 Amitnand Roy v. State of West Bengal, AIR 1976 Calcutta 408.
4 Raghuvendra Kripal v. Municipal Board Hapur, AIR 1959 Allahabad 192.
5 Anjumane Imdad v. Imamdin, AIR 1939 Lahore 275
6 Liquidator v. Hadibandhu, AlR 1953 Orissa 300.
Punjab Co-operative Societies Act, 1961 Section 59
359

(4) Where an order of winding up of a co-operative society is set aside in ap-

neal the property, effects and actionable claims of the society shall revest in
peal
the society.

COMMENTARY
AS Soon as a society is ordered to be wound up all affairs of society vest in its Liquidator
nd rights of members under Sections 18 and 19(2) are taken away. - Section 58 entitles
business of the society so far
the Registrar to appoint a Liquidator who in turn can carry on the
with the previous approval of the Registrar. It is the business of the Primary
as it is necessary
So long as a society is not
Societies to send representatives to the Central and Apex Societies. Societies. After the ap-
and Apex
wound up it has to participate in the affairs of the Central
by him
pointment of a Liquidator, these functions are performed should
and him alone. Ifthe interpre-
be wound up and appoints a
tation, that even if the Registrar orders that a society
under Sections 18 and 19(2) ofthe
Liquidator to wind up its affairs, the right of the members
to nominate one of them to vote
Act of having a vote in the affairs of the society and of a right of Sec-
on its behalf for another society, cannot be
taken away, is accepted, then the very object
even after a committee has been
tions 58 and 59 of the Act will be frustrated. In other words, would be in a po-
allowed to act on its behalf, then he
superseded and a person chosen by it is the intention of the
This could not have been
sition to frustrate the action taken by a Liquidator.
for the normal state of affäirs and
Legislature. Sections 18 and 19 ofthe Act make a provision be wound
AS sOon as a society is ordered to
Sections 58 and 59 consist of special provisions.
come to vest in its Liquidator."
up, all affairs ofthe society
of the Act leaves
Act, Section 446. The reading of Sections 58, 59 and 82(2)
-

Companies of the Companies Act and,

no manner of doubt
that these are para materia with the provisions
the provisions of the
Courts would be applicable even under
therefore, law laid down by the
Act.

rules made in this behalf, the

59. Powers of Liquidator. (1) Subject any
to
in respect of which an order for
whole of the assets of a co-operative society, under Section
has been made, shall vest in the liquidator appointed
winding up have
the date on which the order takes effect and the liquidator shall
58 from
power to
realise such assets by sale or otherwise.

also have power, subject to the control ofthe Reg-

(2) Such liquidator shall
istrar
other legal proceedings on behalf of
(a) to institute and defend suits and
the co-operative society by the name of his office;

contribution (including debts due

(b) to determine from time to time the
and costs of liquidation) to be made or remaining to be made by the
members or by the estates or nominees,
heirs or legal
members or past

I Niranjan Singh v. State of Punjab, 1984 RRR 348 (P&H). 825:

2 State Co-op. Spin. Mills Fed. v. Shakti Traders Cotton &
Oil Merchants, 2007(1) R.C.R.(Civil)
2007(2)PLR 46(P&H) Law Finder Doc Id # 125384.
:
360 Punjab Co-operative
Societies Act, 1961 Section 59
by any officers
former of-
or
m e m b e r s or

representatives of deceased
the assets of the society:
ficers, to

the co-operativesociety and sub:

priority bject toto
claims against
investigate all of priority ariJct
(c) to
of this Act, to decide questions arising be-
the provisions
tween claimants;

society, including interect.

(d) to pay claims against the co-operative upt
priorities ieo
to their respective
the date of winding up according
assets of the society may permit; the srn
in full or rateably, as the
of the claims being applied in
if any, remaining after payment pay-
order of winding up at a ra
date of such rate
ment of interest from the
the contract rate in any case;
fixed by him but not exceeding
and in what proportions the costs of the
(e) to determine by what persons
liquidation are to be borne;
is a member, past member or nomi
(f) to determine whether any person
nee of deceased member;

to the collection and distribution of

(g) to give such directions in regard
the assetsof the society as may appear to him to be necessary for
winding up the affairs of the society;
be necessary for
(h) to carry on the business of the society so far as may
the beneficial winding up of the same;

1) to make any compromise or arrangement with creditors or persons

claiming to be creditors or having or alleging to have any claim, pre-
sent or future, whereby the society may be rendered liable;

g) to make any compromise or arrangement with any person between

whom and the society there exists any dispute and to refer any such
dispute to arbitration;

(k) after consulting the members of the society, to dispose of the surplus.
if any, remaining after paying the claims against the society, in sucn
manner as may be prescribed; and

(1) to compromise all calls or liabilities to calls and debts and liabilities ca
pable of resulting in debts and all claims present or future, in or
contingent subsisting or supposed to subsist between the society and
contributory or alleged contributory or other debtor or person app
a

hending liability to the co-operative society and all

way relating to or affecting the assets or the questions "of
on such terms as be
winding of the disis
up
may agreed and take any security for u
charge of any such call, liability, debt or claim and give a nplete
discharge in respect thereof.
 1961
362 Punjab Co-operative Societies Act,

31. Contributory order- Pre-requists. Section sy

3 2 . Approving Award of Liquidator -
parties implicit in language of Rule 59.
Right of
hearing of
affected
1.Liquidation provisions are compelte Code - Provisions
powers of the liquidator as found in the relevant provisions of therelating
to liauida
Act and the Rl nd the
plete code in itself and it will result in a gross
tion to take place before the Civil Court as inconsistency if we must allow for anCom
well, when the liquidator is
claims made against the
society and for realization of all the assets and empowered tto recciv
sets to several creditors in the
order of distribution eve
Section 85 constituting a bar of Civil certain priorities. In a particular expression used s
Court to the affairs of the
the context of
winding up, to include also the affair of distribution society must be understor
satisfaction of the liabilities due with the of assets of the tood,i
societ
Court below was society to the creditors. The
perfectly justified and the Electricity Board will bar as applied hv t
an
application lodging a claim for the alleged dues of
for only be
If there is any the society to thecompetent to m
not been done so
particular time before when a claim should
have been Electricity Board
far, the petitioner will also have lodged and the same has
tension of time. If such an the liberty to
application apply to the
dency of the civil revision before this is made, the liquidator may considerliquidator the
for ex
accordance with law. Court and exclude the time and fact of pen-
adjudicate the claim in
2.
Liquidator determiningthe liability under the
liquidator to act in a quasi-judicial Act- To pass a
speaking order. The
parties. Order should be a reasonedcapacity and should pass a speaking order after
-

edly quasi- judicial in nature. order. The hearing the

While proceedings
before the
liquidator
quasi-judicial functions. Under section 83 of the determining
the liabilities of the members he undoubt
are
vested with the Act, the performs
powers of a Civil Court as liquidator of a
of
summoning the witnesses, provided by the Code of Civil Society has been in-
facts by affidavits and requiring the discovery and Procedure in
of documents, respect
are conferred issuing
only on judicial and commissions for production
examination of witnesses. Such proof of
shows that thequasi-judicial authorities. The conferment of like powers
tioned powers
section 82 of theclearly
Act, it has been liquidator has the trappings of above men-
business of a provided that no suit or other ajudicial authority. Under
Co-operative Society shall legal proceedings relating to the
such. It is
apparent from these statutorybe proceeded with or instituted
as

ciety performs against the

tice. He cannot quasi-judicial functions. Heprovisions that the
is bound to
liquidator
liquidator of Co-operative
a
So-
determine the points of observe the
opportunity to the person, whose controversy arising principles of
before him without natural jus-
the
liquidator has been liability is to be determined. giving any
erative Society, AIR succinctly laid down in Dharam Pal The scope of the inquiry before
1954 Punjab 268. v. The
Jagadhari Thatera Co-op-
2.Vesting"
that the of property. The term *vest" cannot be
-

it property is owned the

by person or the interpreted to
may differ in authority in whom it vests. From
mean, in all cases,
limited sense as meaning,
may be
i.e., it may vest in title or it cases to
cases,
ticular piece of indicated, in such context in may vest in
possession or it vest
legislation. which it may
might have been used in a
in

3. par-
Liquidator merely filling the
-

proforma appended to the Rules not

Deputy Registrar affirming the order
in appeal. Order set aside as applying his mind.
1
Punjab State
liquidator cannot create li-

2
2014(1) Law Electricity Board v. The
Herald 539(P & H) LawBarnala Co-operative Spinning Mills Ltd.
Santa Singh :
Finder Doc Id # 2013(4) PLR 355
Registrar
v.
492050.
F&V.M. Union DelhiCo-operative Societies, Punjab, 1983(1) LLR 568
:
3
v.
Improvement Trust, AlR 1957 SC 314. (P&H).
PunjabC-YatineS
atiye Societies Act, 1961
Section 59
ing the proforma.
f i l l i n .

s t a n c et
by
s
merely

his
Coun
in Mathra Dass vded to the
State of Rules. In somewhat 363
ability

ofan
awa be made by an
ArbitratorPunjab, 1984 RRR 409similar Circum-
cir
Od 1
have been nrescribed, as has been under the (P&H)
N o

iveSocieties Rules, O63. for the

19
reasons done in
Cooperative Punjab
that Appendix
Cicial decision as an appeal is allowedan award under 'F° to Socie
the Act mustthe Coopera-
a quas.

derthe
Act and a further revisior against an award conform made by an Ar to
that an Arbitrator,
y that
fore, necessary Arbitrator, whil
while etent to the ade Arbitrator
ust set the items or the ispute and thedecidingaa dispute
disn Vemment.
referred It is,
theor those decision, as an rator while decisions
thereon together with to
him under
determining
s acts as a quasi-judicial tribunal and his decision is a
a the rea-
dispute between the
ics

lecision: by reasons so that it isquasi-judicial one. A

par-
i c i a l

and while deciding a disputed questionshown that the quasi-ju-

jed his mind the Arbitrator has
ming to a jparticular conclusion process of sOning for
must be evident from the diseceo
self. Ifthat
not
is not done, the appellate authority will not be able to cussion
know
in the award
how
it
the Arbitra-
to the decision under appeal before him."
torcame
The principles enunciated abov are squarely Pplicable
applicable to
to the
the liquidator also because the
perfor
quasi-judicial functions.
liquidator
Natice under section 55 instead of 59-Efect. Whereit was contended that since the no-
iccted to him, in fact, was issued under Section 55 of the Act and not under Section 59of
icet therefore, it was defective and cannot be deemed to be a valid notice. The learned first
court has
considered this argument of earned counsel for the appellant and has held
appellate Instead of Section 59, by mistake the no-
was a typographical mistake in the notice.
that there issued under Section 55. It was held that since the notice was issued
tice was mentioned to be was not a notice under Section 55 ofthe Act
therefore, it was clear that it
from the Liquidator, Since it was not stage of arbitration as the notice
reference to Arbitration.
which deals with therefore, there was no ambiguity
in the notice and the appellant
was issued by the Liquidator, of the notice. It was held that
there is no il-
dark about the real nature and character court, also
was not in the learmed first appellate
in the aforesaid finding recorded by issue wherein it was
legality or infirmity the findings of the Courts
below on
or illegality in Dhan Sikka v.
there is no infirmity to decide the
controversy.fRam
the Civil Court has no jurisdiction 2004(1) R.C.R (Civil) 490(P&H).
held that Ltd., Industrial Society
Co-op.
Liquidator, Gurgaon Cycle has no power to re-
that the Liquidator
Liquidator. - It has been held and under these cir-
5. Order of arrest by towards the society by
anyone
which may be found due it will not only be illegal,
cover the amount arrest of a member,
regarding the
an order is passed India."
Cumstances, if 21 of
Constitution of
Article
but it will be violating the Liquidator without giv-It
order is passed by him,
notice. Ifany to be imposed against
-

order without the liability lhaoilhny

6. Liquidator's regarding While determiningevidence
an opportunity disicarded. such
person concerned and must be evidence but
ne Natural justice
of su
s u m m o n

Onrary
to piinciples
the liquidator and may nub
member contribution,
regarding act quasi-judicially
of a always
required
to
be one-sided, as he is
a not
sides before passing any order honorary a
held that whenc o m m i t s
mis-appropriation

197 of
It has been
-
and he section

sappropriation by liquidator. the Act under

sanc ct
tiio
on
under
u nder

uidator no
operative society is appointed as a held that
it was

of money received by him as a Li Idator,

Cr.C.P. is necessary for his prosecution. 1 9 5 9 Allahabad 733.

RRR 64 (P&H).
1985
198 AIR

Societies,
Punjab, Union,
Co-op.
ISanta Singh v. Registrar,
Estrar, Co-ope
Co-operative Weavers

2Mohd, Huee
Hussain Ansari v. The Benaras
State Carpet 1054 Punjab 268.
Society,Al 134:129 IC 344
npal v.Jagdhari Thetera Co-operative Do
487 : SL
uabmiya v. Emperor, AIR 1930 Bombay
 Co-operative
Societies
Act,
19617
Section 59
Punjab
J64 After a memberigns from the
resios

therefore, fter suchmem

-

years.
after two nd,
ex-member
reaches the society and,
8.Order against soon as it
him after two years,
In.case resig
withSuch orS
as
into effect against
ship, that
comes

order can be passed Court, as

such order is
no
contributory to the Civil ion.
tion, aggrieved
can go
passed, the person
. Dispute about liquidation. - Thequestions relating to liquidation and disnutos.omplains
es regarding
In view off this if any body
Liquidator only.
to be decided by
are to
one person and other
such liquidation refunded the share capital ersons
that the liquidator
has arbitrarily
such matters can only
be decided by Liquidato the
called upon to contribute,
were not
barred."
Civil Court's jurisdiction is
Where the elder brother ajoint Hindu familv , who
of
10.Liability of Joint
Hindu Family. -

stands surety for him

and his younger brother family member ,then
is Karta also, obtains a loan payment of loan as well ast
of the joint Hindu Family
will be responsible for
every member
contribution.' When individually a member ofthe joint Hindu family becomes member ofthe
loan from it, the liquidator has nojurisdiction to make a con.
cooperative society and obtains a Joint Hindu Family has not
the other members of the family as such
tributory order against the debt might have been bor.
been brought 'h or of
ist members of the society even though
rowed for family purposes only."
11.Order ofcontribution or order ofrecovery of dues. - It was held that where a member
mortgages his immovable property in favour of the Society and after the society was brought
into liquidation, the Liquidator passed a contributory order and in it asked the member to pay
the mortgage money. It was held that order, though styled as contributory order, cannot be
deemed to be so, as it was not an order for contribution to the assets of the Society, but actually
the dues which were outstanding towards the members were ordered to be paid and, therefore,
this order of recovery can be executed by the Civil Court.

12. Jurisdiction of Liquidator. The ingredients of the

-

liquidator's jurisdiction are- (i)

that the person concerned must be a member or a past member of the
society, (11) that he is
jointly liable with other members to contribute the assets of the society. If these two ingredi
ents are satisfied, then the contribution order
a Civil Court. But if the
passed by the Liquidator cannot be challenged in
Liquidator makes an assessment on a person who is not a member or
had ceased to be a member for over two
years before the dissolution of the society or whose li-
ability to contribute has otherwise been extinguished by operation of law, he has
acted
in excess of his
jurisdiction and his contribution order is, therefore, nullity and clearly
could not be
executed.
13.
Insolvency of a member -Contribution law determined. Even
erative society is declared insolvent and a member of a
-

coop-
might have been
exempted from the
not be said that he is also
absolved from the legal laibilities,jt can-
contributory liability of the society.'
A
member of the Cooperative
wards assets of society society became insolvent. The amount of
in event of dissolution of
the society is a contribution to-
proceedings. If the liquidator neither proves his debt provable debt in insolvency
excluded from the schedule under section against the insolvent member nor gets it
33 of Provincial
the complete
discharge was granted to that member under Insolvency Act, with the result that
the provisions of Section 44(2) of
1 Kuppa Govind v. Uttukotai
Society, AIR 1940 Madras 831.
2 Pathena Mandal Sahkari
Stores v.
1953 Orissa 300. Mangulal, AIR 1960 Rajasthan 148
3
Liquidator, Dhavleshwar Co-op. Society v. Liquidator v.
Hadibandhu, AIR
4 M.A.
Koyal v. Bhondlal, AIR 1931 Nagpur Hadibhandhu,
48.
AIR 1953 Orissa 300.
5
Co-op. Central Mehkar v. Gangaram
6 Abdul Ghani v. Keshao, AlR 1953 Nagpur 230.
7 Anjuman-i-lmdad, AIR 1942
Kathu v. Anjuman Imdad Karja, AlR 1949 Lahore 237 ILR (1943) Lahore 533.
Lahore 167.
Punjab Co-operative Societies Act, 1961 Section 59 365

the Provincial Insolvency Act. After the complete discharge, the liquidator has no jurisdiction
to assess the contribution of the insolvent as member of the cooperative society under this sec-
tion. It will be immaterial that the liability of the insolvent member did not materialise till
sometime after the adjudication."

14. No creditor can recover directly from a member. - The personal liability ofa member
comes only after the winding up order is passed against the co-operative society. Further, the
from its members,
Liquidator of a co-operative society is only entitled to recover the amount
no creditor can recover
tothe extent of their liability under the ryles and byelaw. Of course,
such amount from the members directly.
15. Liquidation does not bar the recovery of loan under Section 67-A. - Section 59 does
not exclude the jurisdiction of the liquidator to recover the loan under Section 67-A. No doubt,
scheme of
it has not been stated that Section 67-A overrides Section 59 of the Act but, if the
the sections is seen, it is abundantly clear that for recovering loan specified in Section 67-A,
the Liquidator can proceed under that section. The suit not touching the business of the so-
to the as a loan not barred.
society
Ciety is competent. Suit for recovery of money given
16. Disobedience of summons of liquidator. - If the liquidator issues summons to enforce
summoned disobeys it and it this connection
the attendance of a party for witness and person
for disobedience, the Civil Court cannot go
if the liquidator passes an order of imprisonment
summoned are not ordered to give se-
behind and investigate its legality. Even if the persons
curity before they are directed to be imprisoned."

the Registrar. The order of liquidator is order

ofliquidator to be approved bythe Government."
-

17. Order
lies to
of Registrar. Appeal against the order
a member of Society does not become opera-
18. Order passed by Liquidator
against received
executable only after it has
The order of liquidator becomes
tive by its own force. an order passed
under the Act lays down that
-

of Registrar. Rule 59 of the rules made him to the Registrar

approval the society has to be
submitted by
against a member of accorded his approval to it.
by the Liquidatorbecomes effective only after the said officer has virtue of its
for approval and Liquidator does not become operative by
order passed by a of the
This implies that the executable only after
it has received the approval
becomes Registraraccords
own force.
Such an order run from the
date when the
time for appeal begins to before the Reg-
affected party is present
Registrar. Consquently, ifthe
order passed by the
Liquidatory order approved by the Reg-
approval to the o r from the
date when an
when theorder is passed,
istrar at the time a party.
to such
Istrar is duly conveyed Co-opera-
- Under Section 59 of the Punjab1955, there
the liquidator. Societies Act,
of a n award by Co- operative that
19. Execution
Section 46 of the Punjab sanction from the
Registrar. All
Societies Act,
1961 or without control"
tive out
execution
direction and
bar to the liquidator taking liquidator are subject
to "general
of the liq-
is no
that the powers of the control imply that the power directions
these provide is direction nor the issue
Registrar can
Neither the general Is that the
this it implies statute in a given
of the Registrar. curtailed. All c o n f e r r e d by
the
uidator is in
any
manner
one of the powers
to
exercise any
o r ask the
liquidator not

Lahore 237.
AlR 1942
63.
Board, (1974) RLR
Anjuman-i-Imdad,
PLJ 771(P&H).
Abdul
Ghani v.
and Village 29: 1973 (P&H).
Khadi AIR 1975
(P&H) 515
Punjab 1982 LLR
v. PLR 150: & Sons,
76 S o h a n Lal
D w a r k a d a s

Ishar Dass v. State of Haryana, Bank Ltd.

v.
M/s.
573(P&H).
Central
Co-operative 1984 RRR 457
18. 1984 RRR
4
Nawanshahr

Gale, AlR
1930 Rang. Ltd. v.
State of Punjab, Chandigarh,
v. Society Territory,
5 Aung Nyein Farming
Co-operative Department,
Union

Dheru
Co-operative
Jamiatpur Secretary,
Mohan v.

Madan
(P&H).
 366 Punjab Co-operative Societies Act, 1961
Section 59
case, but that does not mean that previous permission of the registrar is required before the ts
uidator can execute an award. liq-
20. Determination ofliability of each member to pay is quasi-judicial. - Liquidator
sue show-cause notice before determining liability ofeach member. The proceedings forto is
termining liability of each member of the Co- operative Society to pay are quasi-judicial
nature and therefore, it is incumbent upon the LIquidator to issue notices to the members of n
Co-operative Society to show cause as to why they should not be held liable. In 1972 PLR 33 the
Tara Chand v. State of Haryana,, it has been held:- 6

that since the liability to pay of each member has to be determined, the proceedings for
determination are quasi-judicial in nature and it is incumbent upon the liquidator to i.
sue anotice to the members to show cause why they should not be saddled with the
ability proposed.If the member does not object, the liability can be fastened on himbut
ifhe raises an objection that objection has to be gone into and decided. It is not permise
sible to the liquidator tg pass an order of contribution against a member without
such a notice to him.*2 issuing
Whenever a contributory order is required to be passed, the liquidator has to act quasi-iudi.
cially, that is, before coming to a conclusion, he nust record evidence and act according to
procedure laid down under the Act and Rules, and should give the concerned parties proper
hearing. If this is not so done, then the execution application regarding the same will be ille-
gal.
21.
Liquidation Society remains under existence till Registration is cancelled. A co-
-

operative society, even though under liquidation, remains in existence until its registration is
cancelled under the Act. For recovering the loans due to
remedies i.e., (a) the general remedy by
society, the liquidator may follow all
filing a dispute
against the debtor and (b) the specific
remedy under the Section. Both remedies are co-existent side by side and thus the Section
notultra vires Article 14 of the Constitution. No is
doubt, the debtor is required to be given an
opportunity of being heard while passing an order under this Section."

22. Jurisdiction of Civil Court. It has been

held that when a
-

dator is passed against a member of the contributory order of a liqui-

society without jurisdiction, it can be
challenged by
way of suit in Civil Court. But it cannot be
Court. But it cannot be questioned in a proceeding for its execution in Civil
questioned in a proceeding for its execution in
Civil Court. It is
that this section does not
tion.
provide any immunity regarding the action taken without obvious
jurisdic-
If the liquidator acts within his
the civil courts cannot power in passing a particular award or
go into the question whether the amount was
a
contributory order,
or not. assessed correctly by him
23. Recovery of amount due -

Two remedies are under

exclude the jurisdiction of Section 59- Section 59 does not
of a Society the Liquidator to recover
loan under Section 67-A.
for the recovery
winding up of which has been ordered and a Two remedies -

of amount
due are: (1) the Liquidator has been
general remedy under Section 59, and (2) a appointed.
remedy, for recovering the loans mentioned
provided in section speCinc
the debts and the other 67-A. If two remedies of recovery ai
in the Act, one for all
guidance for the officer concerned for specific debts, then there is
to know as to which sufficiet
provision of the Act is to be appie
1 Vasdev
2
Hoshiarpur Kishore Co-operative Bank
v.

Major Singh v. State of Ltd.

Central Co-op. Stores v. Punjab, 1984 RRR 457(P&H). Society,
3
68 PLR 791.
4 Saniti Nidhan, AIR
Ishwardas v. State of 1933 Calcutta 631.
5 Prabhakar Haryana,AIR 1975
Punjab 29
6 Belmerkhed
Mian Allah Yar
v.
(liquidator) Co- operative
v.
Anjuman Imdad Karja, AlR Society, AlR 1946
1941 Lahore 284. Nagpur 161: 225 1C 12
 Punjab Co-operative Socleties Act, 1961 Section 59 367

recovery of a particular debt. A sufficient guidance has been provided in the Act for the Liq-
uidator in what circumstances he has to proceed under Section 59 of 67-A of the Act. Section
59 does not exclude the jurisdiction of the Liquidator to recover the loan under Section 67-A.
No doubt, it has not been stated that Section 67-A overrides Section 59 of the Act but if the
scheme of the section is seen, it is abundantly clear that for recovering loans specified in Sec-
tion 67-A, the Liquidator can proceed under that section.
24. Determination of liability to pay of each member - Show cause notice before deter
mining liability is necessary. - Since the liability to pay ofcach memberhasto be determined,
the proceedings for determination are quasi- judicial in nature and it is incumbent on the liq-
uidator to issue a notice to the members to show cause why they should not be saddled with the
liability proposed. Ifthe member does not object, the liability can be fastened on him but if he
raises an objection, that objection has to be gone into and decided. It is not permisible to the
liquidator to pass an order of contribution against a member without issuing such a notice to
him.

25. Recovery of costs on account of liquidation expenses. Only actualliquidation ex-

penses should be recovered. So far as the costs are concerned, the matter stands settled by the
authority reported as Preet Singh and Sada Ram v. Central Co-operative Bank Ltd., Rohtak,
1984 RRR 317(P&H), wherein it is held that the actual liquidation expenses should be recov-
ered. The Liquidator has been empowered to determine the cost of liquidation incurred and
the same can be duly recovered as Land-revenue arrears. If any incorrect cost is determined,
the agrrieved person may approach the Liquidator or the Registrar

26. Word "Contribution" includes debts which are recoverable from members of the
Society. - The word "contribution" has not been defined but according to clause (b) of sub-sec-
of liquidation. If the word
tion (2) of Section 59 of the Act, it includes debts due and costs
it includes debts which
"debts due" is read in the context ofthe sub-section, it will be seen that
are recoverable from its members.
Thus the word "contribution" has a wide scope which in-
cludes the debts which are recoverable from the members of society.

share in any com-

The Word "contribution'" means payment by each ofthe members of his
an individual member to the
mon loss or liability for
the society. Obviously, a debt owed by
circumstances. Under this section, the liquidator
has no
society will not be such a loss in any for a owed by him to the society
person which may be
jurisdiction to determine the liability as a debtor to the society,
in a sum-
against person
a
The Liquidator is not entitled proceed member for contributing to the assets of the soci-
to
be proceeded as a
manner but he can
mary
ety.
and liabilities are known and
When all the assets
the last resort. is in debt at all and
-

27. Contribution is determinable whether the society

only it is
struck off, then assets no claim for
proper balance is can pay off
its own debts from existing
the society will arise. It is only the
last resort
if so, to what extent. If members or heirs etc.
contribution from the members,
pa_t
that a contribution can be ordered.

1973 PLJ
29: 76 PLR 150:
AIR 1975 (P&H)
Co-operative Department,
State of Haryana,
Ishar Dass v. PLR 376 (P&H).
771(P&H). PLJ 922: 74
Chand v. State Haryana, 1971
of 1982 LLR 544(P&H).
ara Haryana, 1982 PLJ 122:
Risal Singh v. State of 1954 Allahabad
646. 150: AIR
1975

Rarnditi v. Collector
Allahabad, AlR 1973 PLJ 771: 76 PLR
Smt. Department,
Co-operative
v. State of Haryana,
arass Lahore 931
(P&H) 29. AIR 1937
v. Mehar Din,
Quarza 1946 Nagpur 317.
Vasant, AIR
Anjuman-Imdad
Patur v.
C o - o p e r a t i v e
Society
 368 Punjab Co-operative
Societies Act, I1961 Section 60
without notice. An
ed againe a
order for contribution passed
-

against
28. Contribution order mem-
ber without notice to him is without
jurisdiction and, therefore, nullity.
a

29. Contribution and Debt.

The contribution is given by the members only but tha
-
.

amounts to property. In view of this, whenevots

recoverable from the debtors ofthe society
it will not amount to any contribution." any whenever
loan given to a debtor is recovered,

30. Contribution to the assets of Society." - The words "Contribution to the Ascesets of
the Society" means that the members are liable to contribute to assets of the Society in case
it
isbrought under liquidation. The principle of contribution has been clearly borrowed from the
Company-Law. When the members are called upon to contribute to the assets of the societv
they can only be ordered to the extent of their maximum liability which is mentioned in the
By-laws and no more.

31. Contributory order -Pre-requists. Before a contributory order is passed it must be

seen by the Liquidator that there are no sufficient assets and for the purposes of payingthe li
ability, the contributory order is essential."

32. Approving Award of Liquidator Right of hearing of affected parties

language of Rule 59. Held that, Registrar before approving order of Liquidator hasimplicit
-

in
to hear af.
fected parties. Order of Assistant Registrar
fected parties is illegal.
approving award of Liquidator without hearing af.

60. Priority
contributions assessed by liquidator.
of
anything contained in the Provincial Insolvency Act, 1920, theNotwithstanding -

assessed by a liquidator shall rank next to debts contributions

due to the Government or to
any local authority
in order of priority insolvency proceedings.

61. Powers of
(1) The Registrar may after
Registrar to cancel
registration of co-operative society.
him under sub-section
(3)
considering the
of Section 59 orderreport of the liquidator made to
the
tive society to be
cancelled. registration of the co-opera-
(2) An order
tered post to thepassed under sub-section (1) shall be
any, of which the
President of the
society and to the communicated by regis
society was a member. financing institutions, if
Abdul Ghani v.
2
Anjuman-i-Imdad, AIR 1942 Lahore 237.
Ramditti Collector
v.

3
Nagpur 230. Allahabad, AIR 1954 Allahabad
Mohd. Husain 646
Co-op. Bank
=

Ansari v. Banaras v.
Gangaram, AlR 19
5
Bhagwant Liquidator, AIR
v. State Carpet Weavers Co-op.
Shangariv. State of 1956
Nagpur 183: 1956 NLJ Union, AIR 1959 Allahabad
Haryana, 1985 RRR 29 216 ILR 1956 133.
(P&H). Nagpur 38.