Membership cessation rules construed as directory; quota under export canalisation scheme remained tied to continuing membership and past performance.

Membership cessation clauses in a trade association were construed as directory rather than automatic where the rules required committee action, allowed readmission, and the association's conduct showed that default in subscription did not itself end membership. A winding-up order was also not read literally to produce immediate forfeiture of valuable commercial rights while appeal and reconstruction proceedings were pending. Under the export canalisation scheme, quota allocation had to be made through the association and on the basis of membership and past performance; a non-member could not claim quota. On the facts, the company remained a continuing member, so its quota entitlement survived and the relief granted to it was maintained.

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Issues: (i) whether the association's rules relating to cessation of membership for non-payment of subscription or on winding up operated automatically so as to terminate the company's membership before the quota decision, and (ii) whether, under the export canalisation scheme, quota could be denied on the ground that the applicant was not a member or had ceased to be a member.

Issue (i): whether the association's rules relating to cessation of membership for non-payment of subscription or on winding up operated automatically so as to terminate the company's membership before the quota decision.

Analysis: The membership rules were construed as part of a binding contractual framework to be read in the manner intended by the parties. The cessation clauses were treated as directory rather than penal, because the rules contained a proviso for readmission on such conditions as the committee thought fit, together with a mechanism requiring the managing committee's decision on cessation. The association's own conduct, including repeated reminders, acceptance of late payment and referral to the managing committee rather than automatic forfeiture, showed that default did not by itself bring membership to an end. The same approach was applied to winding up: a mere winding-up order, while an appeal and reconstruction proceedings were pending, did not justify a literal and penal interpretation that would destroy valuable business rights where the undertaking might continue as a going concern.

Conclusion: The company's membership was held to have continued, and no automatic cessation was established.

Issue (ii): whether, under the export canalisation scheme, quota could be denied on the ground that the applicant was not a member or had ceased to be a member.

Analysis: The export scheme under the relevant control order and government notifications required canalisation through the association, with distribution of the released quota among the association's members on the basis of past performance and not on a first-come-first-served basis. The association was therefore not free to disregard the membership requirement while allocating quota. The learned single judge's view that even non-members could claim quota was not accepted; however, on the facts, the company was still a member, so the quota claim survived on the basis of membership and past performance. The appellate court also accepted the conditions imposed by the learned single judge and extended the time for compliance.

Conclusion: Quota could not be claimed by a non-member, but the company, being a continuing member, remained entitled to be considered for quota on past performance.

Final Conclusion: The appeal failed, and the order granting relief to the company was maintained with the time for compliance extended.

Ratio Decidendi: Membership cessation clauses in a cooperative or trade association may be construed as directory where the rules, their structure, and the association's conduct show that cessation is not intended to operate automatically and where the member's valuable commercial rights would otherwise be forfeited without final committee action.

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