Recently, the Andhra Pradesh High Court held that an award passed under Section 62 of the A.P. Cooperative Societies Act, 1964 (APCS Act) is not an arbitration award under the Arbitration and Conciliation Act, 1996, thereby rendering a challenge under Section 34 of the Arbitration Act not maintainable.
Brief Facts:
The first appellant obtained a loan from Aryapuram Cooperative Urban Bank Ltd. The second appellant and the third appellant (husband of the first appellant) stood as guarantors. Upon default, the bank initiated recovery under Section 62 of the APCS Act. Following the husband's death, his son was added as a party. An award was passed against the appellants. Though the appellants initially filed an appeal before the A.P. Cooperative Tribunal, they later withdrew it. A writ petition was also filed and subsequently withdrawn. Thereafter, the appellants filed a petition under Section 34 of the Arbitration and Conciliation Act, 1996 before the District Judge, Rajahmundry, challenging the award. The District Judge dismissed the petition as not maintainable, holding that the award was not an arbitration award under the Arbitration Act. The present appeal was filed challenging that order.
Contentions of the Petitioner:
The petitioners argued that the award was passed against the third appellant, who had died before the award date, making the award void and liable to be set aside. Reliance was placed on judgments from the Kerala High Court and the Supreme Court. It was contended that the award should be set aside and the matter remanded for fresh adjudication.
Contentions of the Respondent:
The respondents contended that the proper remedy against an award passed under Section 62 of the APCS Act was only by way of an appeal under Section 76 of the APCS Act. The appellants had initially pursued this remedy but later withdrew their appeal.
It was further argued that the petition under Section 34 of the Arbitration Act was not maintainable as the proceedings were not governed by the Arbitration Act. The respondent also raised objections on the maintainability of the Civil Miscellaneous Appeal.
Observations of the Court:
The Court examined the scope of Section 62 of the APCS Act and noted that the Registrar, upon reference of a dispute, may either decide the dispute, assign it to a designated person, or refer it to an arbitrator. However, it was clarified that a mere designation of the officer as an "arbitrator" does not automatically invoke the provisions of the Arbitration and Conciliation Act.
The Court observed that the Assistant Registrar had passed the award while exercising powers conferred under the APCS Act and not under the Arbitration Act. The nomenclature used in the order could not change the character of the proceedings. It was further observed that the APCS Act provides a specific statutory appeal mechanism under Section 76. The appellants, fully aware of this remedy, initially approached the Cooperative Tribunal but chose to withdraw their appeal without pursuing it to conclusion.
Referring to the Supreme Court judgment in Greater Bombay Cooperative Bank Ltd. v. United Yarn Tex Pvt. Ltd., the Court held that proceedings under the Cooperative Societies Act do not fall within the domain of the Arbitration Act unless specifically so provided. The Court rejected the appellants' argument about the death of the third appellant rendering the award void. It was clarified that procedural objections of this nature should have been raised before the Cooperative Tribunal. The Court concluded that since the proceedings were not arbitration proceedings, no challenge under Section 34 of the Arbitration Act was maintainable. Consequently, the present appeal under Section 37 of the Arbitration Act was also not maintainable.
The decision of the Court:
The Court dismissed the Civil Miscellaneous Appeal, holding that the proceedings under Section 62 of the APCS Act could not be challenged under the Arbitration Act. No costs were awarded.
Case Title: Lakshmi Agencies vs Aryapuram Coop Urban Bank Ltd
Coram: Hon’ble Mr. Justice R. Raghunandan Rao, Hon’ble Mr. Justice Maheswara Rao Kuncheam
Case No.: CIVIL MISCELLANEOUS APPEAL NO: 620/2016
Advocate for the Applicant: Ms. M. Nikitha and Smt. M.V. Ramana Kumari
Advocate for the Respondent: Sri T.V.S. Prabhakara Rao
Read Judgment @LatestLaws.com
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