S. M. DON NEREUS, Appellant, and HALPE KATANA CO-OPERATIVE STORES SOCIETY, LTD ,

125-NLR-NLR-V-57-S.-M.-DON-NEREUS-Appellant-and-HALPE-KATANA-CO-OPERATIVE-STORES-SOCIETY-LTD-.pdf

1956Present: Basnayake, C.J., and de Silva, J.S. M. DOM NEREUS, Appellant-, and HALPEKATANA CO-OPERATIVE STORES SOCIETY, LTD.,Respondent
X. G. 170—D. C. Negombo, 16,683
Co-operative. Societies Ordinance—Section 43—Reference of dispute to Registrar—Procedure—Requirement of agreed reference—Award of arbitrator—Appealtherefrom—Parties must be heard—Refer,ibility of dispute to arbitration—Crucial date—Validity of Rule 38 {13) made under Sect ion 46 (2) (t).
In an appeal to tho Registrar under section 45 (3) of tho Co-operative SocietiesOrdinance, tho appellanfcshould be afforded an opportunity of being heard beforea decision is mado against him. Failure to observe tho rule of audi alterampartem, would vitiate the decision of tho Registrar.
BaS.vavakb, C.J.—(i) The proper way to refer a dispute to tho Registrarunder section 45 of tho Co-operative Societies Ordinance is to send to thoRegistrar an agreed statement setting out tho relevant facts anti tho mattersin dispute signed by both parties to tlio dispute. An ex parte statementsigned by one of the parties alone would not be a proper reference.
The referability of a dispute to arbitration under section 45 must bedetermined on the state of the law at the time the dispute arises.
Rulo 33 (13) which provides that an award shall bo enforceable as if it
wore a decree of Court is ultra vires..
I^.PPEAL from a judgment of the District- Court, Negombo.
//. IF. Jayeioardene, Q. C., with S. IF. Jayasootiya and A. G. M. Uvais,for Judgment-Debtor-Appellant.
R. S. R. Coomarasicamy, with B. A. R. Candappa, for Judgment-Creditor-Respondent-.
Cur. adv. vult.
.AL-iy 10, 1050. Baskayake, C. J.—The appellant was the Secretary of the Halpe Katana Co-operativeStores Society Ltd from 1944 till 31st January, 1945. In November,1040, a claim appears to have been made against the appellant for asum of Rs. 1,492/08 being the value of textiles lost in consequence of theStores being burgled. He disputed lxis liability and the dispute wasreferred to arbitration. In 1948 the arbitrators made an award forRs. 1,492/OS against the appellant. He appealed to the Registrar and in1949 the award was set aside on the ground that section 45 of the Co-operative Societies Ordinance, as it then stood, waa not applicable to thedispute between the appellant and the Society because the appellant hadleft the service of the Society at tho time the dispute arose and was there-fore not an “ officer of the Society Thereafter the Society at a general22lvii
2J. X. B 56332—1,592 (7/50)
meeting held on 29th April, 1951, unanimously decided to waive theclaim. Sometime later Don Stephen Jayakody, a member of the Society,applied to the Registrar to refer the same dispute to arbitration and anaward was made on 3rd January, 1952, ordering the appellant to paya sum of Rs. 700 to the above-mentioned Socioty. He appealed to theRegistrar, and on 5th February, 1952, his appeal was dismissed.
On 29th July, 1952, the Society made application for enforcementof the award as if it were a decree of Court. On 5th May, 1953, theappellant applied for a stay of execution and in the petition lie filed heprayed inter alia that the .award be declared null and void. On thesame day the Society also filed a petition setting out the facts relatingto the arbitration with an affidavit- from one W. D. Saviol Appuhamvwho claimed to be the duly appointed legal representative of the Society.On 12th November, 1953, the appellant, filed objections to the Society’sjjc-tition challenging the jn'occdure adopted and also attacking the awardas a nullity on several grounds.
The main points urged at the hearing of this appeal are ;—
*■' (1) that the second reference was bad as the appellant was an ex-officer of the Society and that under the Jaw in force at thetime the claim arose a dispute between the Society and anex-officer could not be referred to arbitration,
that the second award was bad and contrary to the rules of natural
justice as the Registrar dismissed the appellant’s appealwithout affording him an opportunity of being heard,
that rule 3S (13) which provides for the enforcement of an award
as if it were a decree of Court is ultra vires. ”
Before I discuss the above points I should like first to refer to section45 of the Co-operative Societies Ordinance in the form in which it stoodbefore its amendment in 1919. It reads as follows :—
“ 45 (1) If any dispute touching the business of a registered societyarises—
(a) among members, past members, and persons claiming throughmembers, past members and deceased members ; or
between a member, past member or person claiming througha member, past member or deceased member, and the society,its Committee or any officer of the society ; or
between the society or its Committee and any officer of thesociety ; or
(rl) between the society and any other registered society,such disputes shall be referred to the Registrar for decision.
A claim by a registered society for any debt or demand due to itfrom a member, past member or the nominee, heir or legal representa-tive of a deceased member, whether such debt or demand be admittedor not, shall be deemed to be a dispute touching the business of thesociety within the meaning of this subsection.
TJic Registrar may, on receipt of a reference under sub-section (I)—
(a) decide the dispute himself, or
{b) refer it for disposal to an arbitrator or arbitrators.
Any party aggrieved by the award of the arbitrator or arbitrator*may appeal therefrom to the Registrar within such period and in suchmanner as may be prescribed.
A decision of the. Registrar under subsection {2) or in appealunder subsection (3) shall be final and shall not be'ealled in questionin any civil court.
(.3) The award of the arbitrator or arbitrator’s under subsection (2)shall, if no appeal is preferred to the Registrar under sub-section (3)or if any such appeal is abandoned or withdrawn be final and shallnot be called in question in any civil court-. ”
It would appear from an examination of tire section that it providesfor the reference to arbitration of four classes of disputes. Before areference to arbitration can be made under the section there must in thefirst place be a dispute i.e. a contention or controversy or a disagreementin which orre party claims something and the other denies it. Then thedispute must be one of the classes (a), (b), (c), or (d). In the instantcase it would appear that after the Stores was burgled the Society assertedthat the ajrpellant was liable to make good the loss and he denied it-But as the appellant had left the service of the Society at the time thedispute arose it was held that it did not fall within category (c) in sub-section (1), because he was no longer an officer of the Soeictj-.
It was on that ground that the Registrar appears to have set aside thefirst award against the appellant- It would appear from the minutesof the general meeting of the Society held on 29th April, 1951, that thedispute between the Society aud the appellant had ceased to exist-, andthe Society did not again ask for a reference. It was not till 2GthSeptember, 1951, that D. S. Jayakody, a member of the Society, madehis application to the Assistant Registrar, Co-operative Societies, WesternProvince. By then section 45 of the Ordinance had been amended bysection 9 of Act No. 21 of 1949 so as to permit disputes between theSociety or any member and any officer or employee of the Society, whetherpast or present, to be referred to arbitration. That application is inthese terms :—-
“ ARBITRATION
Submission to the A.R.C.S., W.P. _
The dispute between Don Stephen Jayakody of Ambalayaya,
' Katana, Plaintiff, and Setunga JIudah'ge Don Ncreus of Halpe, Katana,Defendant, submitted to the Assistant Registrar of Co-operativeSocieties, Western Province, for arbitration under section 45 ofOrdinance No. 16 of 1936 (Cap. 107) as amended by Act No. 21 of 1949.
• Amount claimed is Rs. One thousand four hundred & ninety twoS/l 00.
The above named Setunga Mudalige Don Ncrens Defendant was theManager of the-Halpe Katana Co-op. Stores from 1944 up to 31st.January, 1945.
The claim for Its. One thousand four hundred & ninety two andcents eight- only is made up as follows '—
Loss of textiles.. Its. 1,492 OS
—
.—
Total .. Its. 1,492 OS
The above named PlaintifT requests an award authorising the recoveryof the said sum of .Rs. One thousand four hundred & ninety two amicents 8/100 with interest at 10% per centum per annum from January1945 to up to date and the cost of this arbitration.
All summonses and other notices regarding tlie arbitration maybe served on Don Stephen Jayakody of Ambalayaya, Katana, andothers given in overleaf.
A copy of the Letter of Demand served on the defendant annexedhereto.
Sgd. D. S. Jayakody
Member, Halpe Katana Co-operative Stoics Society Ltd.
Dated at Ambalayaya, Katana,on the 26tli day of September, 1951
The matter was on 4th October, 1951, referred by the AdditionalAssistant Registrar of Co-operative Societies, Western Province, toarbitration in the following terms :—
“ REFERENCE TO ARBITRATION
Under the authority given in section 45 of the Co-operative SocietiesOrdinance No. 16 of 1936 (Cap. 107) as amended by Act No. 21 of1949 and the rules in force thereunder, I hereby refer for the decisionof Mr. D. K. Samaranayake, 330, Union Place, Colombo, asArbitrator(s) the dispute which has arisen between Mr. Don StephenJayakody a member of the Halpe Katana Co-operative Stoics SocietyLimited, of Ambalayaya, Katana, and Mr. Setunga Mudalige DonXereus of Halpe, Katana, (namely) whether the said Mr. S. M. DonXcrcus do owe the said Society the sum of Rupees one thousandfour hundred and ninety-two and cents eight (Rs. 1,492/OS) being theloss of textiles which occurred during the period he was the managerof the said Society from 1944 to 31.1.1945 with 10 % interest).
Sgd. T. B. ElkaduwaAddl. Asst. Registrar, Co-operativeSocieties, W. P,
4.10.51
Although the reference speaks of a dispute between Don StephenJayakody and Setunga Mudalige Don Kerens it sets out the old disputebetween the Society and Don Kereus wliich had been referred to- arbitration and had come to an end with the quashing of the award. TheSociety did not rc-agitate the matter thereafter, and regarded it closed.
Such being the case the reference does not fall within section 45 evenin its form as amended in 1949. For, there is now in fact no disputebetween the Society and the appellant nor is there any real disputebetween Jayakody and the appellant. Even if in fact there was, betweenJayakody and Don Kerens, a dispute falling within the ambit of section45 as amended there has been no proper submission to arbitration inthis case..
In declaring that any dispute falling within the ambit of the section“ shall be referred to the Registrar for decision ” the section does notprescribe the person who shall make the reference. In the absence ofsuch provision the proper way to refer a dispute to the Registrar fordecision would be to send to the Registrar an agreed statement settingout the relevant facts and the matters in dispute signed by both partiesto the dispute. An ex parte statement signed by one of the partiesalone would not in my opinion be a proper reference under the section.
Arbitration is essentially a matter which can take place only whenthe parties are agreed as to the disputes between them and also as to theperson by whom they should be decided. The award is therefore badnot only because there is in fact no dispute between Jayakody andDon Kereus as contemplated in section 45 but also because there has beenno agreed reference to the Registrar.
Arbitration proceedings under section 45 have far reaching consequencesand it is important that the proper procedure should be followed if thefinality contemplated in subsection (4) is to be attached to the decisionsmade under the powers granted by the section.
It would be convenient at this point to deal with the submissionof Counsel that the parties to an appeal to the Registrar should be affordedan opportunity of being heard before a decision is made.
Seeing that the Registrar’s decision is final and cannot be called inquestion in any civil Court I am of opinion that the Registrar is bound toafford such an opportunity.
One of the principles of natural justice is that no party ought to becondemned unheard.
In the case of Builders v. Union Government , Wessels, J. A., statedthe rule thus in regard to tribunals created by Statute :— .
“ Unless we adopt the view that the Legislature always impliesthat the principle audi alteram partem should be read into a statutoryinquiry, the grossest injustice may be done to the person charged ”.
. This same principle is thus stated in the Kew Zealand case of NewZealand Dairy Board v. Okilu Co-operative Dairy Co., Ltd. 2.
“ It is a sound principle that natural justice exists unless so deniedby statute
The principle is equally applicable to tribunals as well as arbitrators *.There is no hard and fast rule to be observed as to the procedure by whichthe tribunal is to hear the cases of the parties. A principle can howeverbo deduced from the decisions on the point that a hearing implies thatthe procedure and methods adopted by the tribunal must not manifestlydepart from the procedural standard appropriate to a tribunal of its kind.The appropriate standard depends upon the nature of the tribunal andof the inquiry and the matters that have been left to its adjudication.Where matters which, but for the statute, would ordinarily have comebefore the Courts are left to be decided by a special tribunal then itsprocedure should approximate as near as may be to the standards ofthe Courts. Having regard to tire extensive ramifications of theco-operative movement in this county many of the disputes which comewithin the ambit of the section are such as would but for the statuteordinarily be agitated in the Courts and their monetary value can incertain cases be extremely high. The present dispute though the amountinvolved is only Bs. 1,492/08 is one that woxdd ordinarily have beenadjudicated upon in the Courts. The Registrar did not afford theappellant an opportunity of being heard before an order against him wasmade. He has therefore failed to observe the rule of audi alteram 'partemand his decision is therefore vitiated. .
The next question that arises for consideration is whether the secondreference was bad as under the law in force at the time the dispute aroseit was not one that fell within the ambit of the section. It is admittedthat at the time the dispute arose it was not referable to arbitration. Forthat reason the first award was set aside by the Registrar. The refer-ability of a dispute to arbitration under the section must be determinedon the state of the law at the time the dispute arises, because that isthe time at vliieh the decision to make a reference has to be made—notmany years later. In the instant case the dispute that arose in 1945was referred to arbitration a second time in December, 1951. I am ofopinion that the appellant is entitled to succeed on this point too.
The third ground taken by the appellant is that Rule 38 (13) of theRules appearing in Gazette Ho. 10,086 of 24th March, 1950, which providesthat an award shall be enforceable as if it were a decree of Court is ultravires. The enabling provision, section 46 (2) (t), reads—
“ (f) prescribe the mode of appointing an arbitrator or arbitrators,and the procedure to be followed in proceedings befoxe the Registraror such arbitrator or arbitrators, and the enforcement of the decisionsof the Registrar or awards of arbitrators ” ;
The rule made under this power purports to do more than prescribe“ the enforcement of the decisions cf the Registrar or the awards of thearbitrators ”. It purports to give an award the legal effect of a decreeof a Court of law. Such a thing can be done only by legislation and theenabling section affords no authority for such a rule.-
1 In re Carus-VTitson it Greene (18 Q. B. D. T).
The Civil Procedure Code makes express provision for the enforcementof the awards of arbitrators where a matter has been referred to arbitrationwithout the intervention of a Court of Justice (section 696). Even inthat provision the award is not equated to a decree. On this ground toothe appellant is in my opinion entitled to succeed.
For the above reasons the judgment of the District Judge is set asideand the appeal is allowed with costs.
de Silva, J.—
I have had the advantage of reading the Judgment of My Dol’d theChief Justice and I agree that this appeal should be allowed ■n’ith costs.In my opinion the second award was bad in that there was a breach ofa rule of natural justice when the Registrar dismissed the appeal withoutaffording the appellant an opportunity of being heard. I would alsowish to observe that the procedure to be followed in referring a disputeto.the Registrar for decision in terms of Section 45 of the Co-operativeSocieties Ordinance was not a point which was argued in this appeal and-I would therefore refrain from expressing an opinion on that matter.
Appeal alloivecf.