1931 (6) TMI 8 - HC - Companies Law

Co-op Society: Members Not Liable

Harihar Prasad Versus Bansi Missir and Ors.

The court held that a co-operative society is a separate legal entity, and execution cannot be levied against individual members unless expressly provided ... - Issues Involved:1. Entitlement of the decree-holder to issue execution against individual members of a co-operative society.2. Legal status and liability of a co-operative society as a body corporate.3. Applicability of the Civil Procedure Code in executing decrees against members of a co-operative society.Detailed Analysis:1. Entitlement of the Decree-Holder to Issue Execution Against Individual Members of a Co-operative Society:The primary question was whether the Central Bank Limited of Gaya, a society registered under the Co-operative Societies Act, was entitled to issue execution against individual members of the Gajadharpur Society, which was also a registered co-operative society. The Central Bank had obtained an award under the Act, which had the effect of a civil court decree, and sought to execute this decree against individual members of the Gajadharpur Society.The District Judge of Gaya had ruled that execution could not be levied against individual members but only against the society itself and its assets. This decision was appealed, and the matter was referred to a larger bench due to the customary practice in the province of executing decrees against individual members.The bench affirmed the District Judge's decision, emphasizing that a body corporate is a separate legal entity, and creditors must look to its assets for payment. The members can only be called upon to contribute in case the Act or Charter provides for such liability. The court concluded that the incorporation of a society under the Act creates a separate legal persona, and execution against individual members is not permissible unless expressly provided by statute.2. Legal Status and Liability of a Co-operative Society as a Body Corporate:The court discussed the juridical conception of a body corporate, noting that under both Indian and English law, a body corporate is a separate legal entity. The liability of its members is limited to their contribution to the society's assets upon dissolution. The court referred to several English cases, including 'In re Sheffield & South Yorkshire Permanent Building Society' and 'A. Salomon & Salomon & Co. Ltd.,' to illustrate that individual members are not liable for the society's debts unless expressly provided by statute.The court also examined the Co-operative Societies Act, particularly Section 4(2), which pertains to societies with unlimited liability. It was noted that the liability of members in such societies is unlimited, but this liability can only be enforced upon winding up, not through direct execution against individual members.3. Applicability of the Civil Procedure Code in Executing Decrees Against Members of a Co-operative Society:The court explored the provisions of the Civil Procedure Code and concluded that there is no method under the Code to execute a judgment against individual members of a co-operative society. Order 21, Rule 30 of the Civil Procedure Code provides for execution against the judgment-debtor, which in this case is the society, not its individual members.The court also referred to Section 44 of the Co-operative Societies Act, which allows the Government to recover sums due from a registered society or its members. This section was seen as an exception, indicating that creditors other than the Government cannot recover from individual members.In conclusion, the court affirmed the decision of the District Judge, stating that execution against individual members of a co-operative society is not permissible under the Co-operative Societies Act or the Civil Procedure Code. The appeal was dismissed with costs.Judgment:The appeal is dismissed with costs. All judges agreed with the decision.