Defendants Nos.1 to 3 have sought stay of the proceedings under section 34 of the Arbitration Act, 1940 on the ground that the plaintiff is not entitled to file the suit as the cause of action relates to a dispute regarding business of the society between members/past members and is hit by section 54 of the Co-operative Societies Act, 1925 and it is to be referred to the Registrar for decision by himself or by his nominee.
It would be relevant to give a brief narration of the averments made in the plaint. It is the case of plaintiff that he is in possession of Flat No,M-5, Ismaili Masalwala Cooperative Housing Society Limited (hereinbelow to be referred as society) as real owner and has remained in possession since the time it was delivered to him by the Society, the defendant No,1 . The flat was originally booked in the name of Ghulam Ali Muhammad Ganji having flat membership No,144 in Class 'D' in the society. In or about February, 1960 the plaintiff, for valuable consideration obtained flat membership No,144 in the name of his father Hussain Shalmin Shalwani and purchased the flat Benami in the name of his father. He paid the total cost of the flat amounting to Rs,17,000 to the society. The plaintiff suffered an attack of paralysis in 1976 and died in 1986. Earlier, in July, 1985 the plaintiff's brother Badruddin, Sher Ali and Ismail made an application to the Society to transfer the flat to plaintiff and after the death of their father they confirmed in writing on 1-8-1989 that the plaintiff's father was the real owner of the flat. The society did not enter such change in its record and the flat continued to be in the name of plaintiff's father. In early 1999 the plaintiff came to know that Hussain Shalmani had nominated Mrs. Daulat Bai as his nominee, therefore, the rights were transferred in her name. Subsequently, the flat was entered in the name of defendant No,4 which change, according to plaintiff, was made in a fraudulent and surreptitious manner. The plaintiff has, therefore, sought the following main reliefs:---
(a) A declaration that the plaintiff is the real owner of the Flat No,M-5, in the defendant No,1 Society and is entitled to get the flat transferred in his name.
(b) An order directing the defendant No,1 to cancel the name of Mst. Daulat Bai and the defendant No,4 as owner of Flat No,M-5 in the defendant No,1 Society and to enter the name of plaintiff as owner thereof.
(c) A permanent injunction restraining the defendants from dispossessing the plaintiff from Flat No,M-5 in defendant No,1 Society et in any manner stopping/interfering with water supply and other amenities and/or alienating selling, transferring encumbering the Flat No, M-5 to any person except the plaintiff.
(d) Rs,10,00,000 (Rupees ten lacs) as damages."
3. On behalf of the defendants it was stated in the affidavit-in-rejoinder that Hussain Shalmani had applied for membership of the society on 2-1-1960 which was 'sanctioned and then he applied for transfer of membership from Ghulam Hussain Muhammad Gangji to his name and since the crucial point relates to determination of the question as to who is member of the society. Hussain Shalmin or his son Amir Ali, the plaintiff, the matter is to be referred to arbitration as per law. The defendant No,4, in her affidavit, supported the application for stay of the proceedings.
4. Learned counsel for defendants submitted that the plaintiff's claim is wholly based on his assertion that he purchased flat membership in the name of his father Hussain Shalmin, and in this manner he claims to be. a member of the society whereas in the plaint itself it is indicated that, the society, the defendant No,1, did not accept him as member at any point of time. He urged that the dispute touches the business of the society and is to be referred to the Registrar for decision by himself or his nominee. Learned counsel further argued that the plaint is liable to be rejected as the suit is'. Barred by limitation under Article 91 of the Limitation Act.
5. Learned counsel for plaintiff contended that in the letter dated 11-11-1999 (Annexure 'G-3' to the plaint) the defendant No,1 has clearly stated that plaintiff was not a member of their society, therefore, he cannot take a plea that the claim of plaintiff relates to a dispute between members of the society. Simultaneously, he argued that the nomination form dated 10-10-1969 (Annexure 'C' to the counter-affidavit) is a forged one and not singed by Hussain Shalwani, therefore, it has no legal effect. Regarding the point of limitation he contended that such plea has not been taken in the instant application and no application under Order VII, rule 11, C.P.C. Has been moved by the defendants. Finally, he urged that his claim relates to dispute about the ownership of the flat, therefore, it is not a matter touching the business of the society.
6. The entire controversy rests on determination of the question regarding applicability of the provisions of section 54 of the Cooperative Societies Act, 1925 (hereinabelow to be referred as 'Act') to the instant case. For the sake of convenience the same are reproduced hereinabelow:--
54. Arbitration.---If any dispute touching the business of a society other than a dispute regarding disciplinary action taken by the society or its committee against 'a paid servant of the society arises.--
(a) between members or past members of the society or persons claiming through a member or past member, or
(b) between members or past members or persons so claiming and any past or present officer, agent or servant of the society, or
(c) between the society or its committee, and past or present member of the society, or
(d) between the society or its committee, and any past or present officer, agent or servant of the society, or a survey of such officer, agent or servant, whether such surety is or is not a member of the society, Or
(e) between a financing bank authorised under subsection (1) of section 34 and person who is not a member of a society. it shall be referred to the Registrar for decision by himself or his nomiree, or if either of the parties so desires, to arbitration of three arbitrators who shall be Registrar or his nominee and two persons of whom one shall be nominated by each of the parties concerned.
A dispute shall include the question whether a person is or was a member of a society and also claims by a society for debts or demands due to it from a member, past-member or non-member or the heirs or assets of a past member or non-member whether such debts or demands be admitted or not: Provided that if the question at issue between a society and a claimant, or between different claimants, is one involving complicated questions of law and fact, the Registrar may, if he thinks fit suspend proceedings in the matter until the question has been tried by a regular suit instituted by one of the parties or by the society. If no such suit is instituted within six months of the Registrar's order suspending proceedings the Registrar shall take action as laid down in paragraph 1 of this section."
7. This provision would apply if dispute touches the business of societies and arises between the persons classified in classes (a) to (e). Instantly, the plaintiff is neither a member nor a past member of the society albeit he has set up his claim through his father namely Hussain Shalmeen who was a member of society, asserting that he had purchased flat membership in the name of his father. The defendant No,2 being President of the Society and defendant No,3, the Secretary, fall within the definition of officer as contemplated in clause (d) of the section 3 of the Act. Father of plaintiff has died hence his membership ceased to exist, particularly it is to be noted that according to plea taken by the defendant the plaintiffs father is no more a member while the flat in question has been transferred to defendant No,4. The plaintiff, therefore, emphasizes that he has dispute with his sister, defendant No,4 and he does not claim through a member. Admittedly, the plaintiff himself is not a member, therefore, the dispute cannot be fairly treated as one between a member, therefore, a person claiming through a member. No doubt the officers of the society have been joined as defendants, but the dispute pliantly is in respect of the plaintiff's claim that he purchased the property in the name of his father and that it was a Benami transaction, he being the real owner and his father the ostensible owner. In section 54 of the Act, the phrase, the dispute touches the business of the society predominantly lays down a prerequisite to be satisfied first, by establishing that the controversy pointedly relates to the working of the society. Plaintiff's claim is that he purchased the flat through a Benami transaction, therefore, it can reasonably be said that in the suit the main controversy, in substance, would be whether; the plaintiff's claim of Benami transaction is substantiated or not. Indeed, determination of a transaction as Benami or otherwise is not within the scope of the business of the society. Adjudication of such a point squarely rests within the domain and jurisdiction of Civil Court and not the society.
8. The proviso to this section specifically draws a line of distinction pointing out that if the question at issue between the society and a claimant or between different claimant is one involving complicated questions of law and fact, the Registrar may suspend the proceedings. It is evident that the issue regarding determination of Benami transaction is a complicated question and is to be decided by the Civil Court. Circumstances of this case cannot be moulded to bring it within the ambit of section 54 of the Act on the sole ground that the defendants are officer of the society and one of them is perhaps a member. Further, the plaintiff has made a prayer the name of Mst. Daulat Bai and defendant No,4 as owner of flat in question in the record of defendant No,1 be cancelled and the name of plaintiff be entered as owner. This relief is not to be claimed through a member and although it refers to record of the society but, as aforesaid, the plaintiff is claiming his right independently on the strength of Benami transaction. Secondly, the plaintiff in para. 16 has claimed that even otherwise as a legal heirs of deceased his name should have been biought on record instead of transferring the flat in the name of the nominee namely Mst.Daulat Bai. Apparently, it gives an impression that transferring the flat to a nominee is within the business of the society but when such an action is taken excluding the 'legal heirs, its validity will be open to question. The point has been settled by the Hon'ble Supreme Court in Amtul Habib v. Musarrat Parveen (PLD 1974 SC 185) which proposition was affirmed in subsequent authority Muhammad Nawaz v. Sardar Begum (1990 SCM R 868). On considering the question of transfer of interest on death of a member within the purview of section 27 of the Act the Hon'ble Supreme Court dealt with the question whether a nomination made under section 27 of the Act validly effects a transfer of immovable property in favour of the nominee absolutely and to the exclusion of all other legal heirs of the deceased nominator, and held as under:-- "Apart from this, it appears to us that, unless a nomination can amount to a valid gift inter vivos, it cannot pass title to the nominee in respect of immovable property, nor can the making of a nomination give the right to the nominator at his own choice to change the law of succession which would otherwise be applicable in the case of his death. Obviously, the nomination cannot operate as a valid gift under the Muhammadan Law, because, such a gift, in order to confer title on the donee, must be accompanied by delivery of possession of the property gifted."
9. Thus, the right and title which the plaintiff asserts would be a question touching the provisions of law of succession and the society cannot adjudicate upon such an issue since the plaintiff has questioned the transfer made in favour of defendant No,4 on the basis of right of inheritance. All these questions of law and fact can better be decided by the Civil Court.
The learned counsel for the parties referred to case law as to whether the matter fell within the ambit of section 54 of the Act but it would be sufficient to mention that the complicated question involved in the suit is to be tried and decided by the civil Court, as discussed earlier.
In view of the foregoing discussion I am convinced that the proceedings of the instant suit need not be stayed and it is not necessary to refer the matter to the Registrar, Cooperative Societies for decision by himself or by his nominee. The application is without merits and is dismissed.