Bombay High Court
Abhudaya Co-Op Bank Ltd. Its ... vs Ms. J. Square Steels Pvt. Ltd Its ... on 13 October, 2017
Bench: R.D. Dhanuka
Writ Petition No.5528/2010 with
connected matters
1
IN THE HIGH COURT OF JUDICATURE AT BOMBAY,
BENCH AT AURANGABAD
WRIT PETITION NO.5528 OF 2010 WITH
CIVIL APPLICATION NO.4032 OF 2017
M/s. J. Square Steels Pvt. Ltd.,
A Private Limited Company,
having its factory at Gut No.850,
24 Km. Stone, Paithan Road, Bidkin,
Tq. Paithan, District Aurangabad,
through its Director,
Shri Rajendra Namdeorao Ekambe,
Age 38 years, Occ. Business,
R/o At and Post Krishnapur, Bidkin,
Tq. Paithan, District Aurangabad ... PETITIONER
VERSUS
1) The Union of India,
through its Secretary, Department of
Agricultural and Co-operation,
Ministry of Agriculture,
Govt. of India, Room No.398-A,
Krishi Bhawan, New Delhi - 1
2) The Central Registrar,
Multi-State Co-operative Societies,
Department of Agricultural and
Co-operation, Room No.398-A,
Krishi Bhawan, New Delhi - 1
(Copies to be served for respondent
No.1 and 2 on the Standing Counsel of
Union of India for Bombay High Court,
Bench at Aurangabad)
3) Abhyudaya Co-operative Bank Ltd.,
K.K. Tower, G.D. Ambekar Marg,
Parel Village, Mumbai PIN 400 012 ... RESPONDENTS
.....
Shri N.B. Suryawanshi, Advocate holding for
Shri S.W. Munde, Advocate for petitioner
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Writ Petition No.5528/2010 with
connected matters
2
Shri S.B. Deshpande, Assistant Solicitor General
for respondents No.1 and 2
Shri S.S. Deve, Advocate for respondent no.3
.....
WITH
FIRST APPEAL NO.2749 OF 2009 WITH
CIVIL APPLICATION NO.10993 OF 2017
Mrs. Sanyogita N. Jadhav,
Age 36 years, Occ. Business,
R/o CIDCO, Aurangabad ... APPELLANT
VERSUS
1. M/s J. Square Steels Pvt. Ltd.
A Private Limited Company,
Registered under the Companies Act,
1956, and having its factory at
Gut No.850, Village Bidkin,
Tq. Paithan, District Aurangabad
through its Director
2. Abhyudaya Co-operative Bank Ltd.,
A Multistate Scheduled Bank,
having its Administrative Office at
K.K. Tower, Abhyudaya Bank Lane,
Off. G.D. Ambekar Marg,
Parel Village, Mumbai - 400 012
through its Authorised Signatory ... RESPONDENTS
.....
Shri V.M.Thorat, Advocate holding for
Shri N.B. Suryawanshi, Advocate for appellant
Shri S.S. Deve, Advocate for respondent No.2.
.....
WITH
CIVIL APPLICATION NO.13313 OF 2011 IN
FIRST APPEAL NO.2749 OF 2009
Abhyudaya Co-operative Bank Ltd.,
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Writ Petition No.5528/2010 with
connected matters
3
having its Administrative Office at
K.K. Tower, Abhyudaya Bank Lane,
Off. G.D. Ambekar Marg,
Parel Village, Mumbai - 400 012 ... APPLICANT
VERSUS
1. Mrs. Sanyogita N. Jadhav,
Age 36 years, Occ. Business/ Housewife,
R/o CIDCO, Aurangabad.
2. M/s J. Square Steels Pvt. Ltd.
A Private Limited Company,
Registered under the Companies Act,
1956, and having its factory at
Gut No.850, Village Bidkin,
Tq. Paithan, District Aurangabad
through its Director ... RESPONDENTS
.....
Shri S.S. Deve, Advocate for applicant
Shri S.V. Adwant, Advocate for respondent No.1
Shri N.B. Suryawanshi, Advocate holding for
Shri S.W. Munde, Advocate for respondent No.2
.....
WITH
ARBITRATION APPEAL NO.1 OF 2015 WITH
CIVIL APPLICATION NO.1449 OF 2015
Abhyudaya Co-operative Bank Ltd.,
A Multi-state Scheduled Bank
having its Administrative Office at
K.K.Tower, Abhyudaya Bank Lane,
Off. G.D. Ambekar Marg,
Parel Village, Mumbai - 400 012 ... APPELLANT
VERSUS
1. Mr. Shripatrao M. Jadhav,
(Deceased, through Legal Heirs)
a) Mrs. Nalini w/o Shripatrao Jadhav,
Age 70 years, Occ. Household,
R/o Plot No.18 & 34, CIDCO, N-3,
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Writ Petition No.5528/2010 with
connected matters
4
Aurangabad - 431 003
b) Mrs. Shaila w/o Atmaram Mapari,
Age 47 years, Occ. Service,
R/o Row House No.13,
Dharti Dhan Plaza, CIDCO, N-4,
Aurangabad.
c) Niranjan s/o Shripatrao Jadhav,
Age 43 years, Occ. Business,
R/o Plot No.18 & 34, CIDCO, N-3,
Aurangabad - 431 003
2. Mrs. Sanyogita N. Jadhav,
Age 36 years, Occ. Business,
R/o Plot No.18 & 34, CIDCO, N-3,
Aurangabad - 431 003
3. Mrs. Rajmati V. Ekambe,
PL SB/10/7, Sector 9, Khanda Colony,
New Panvel, District Raigadh
PIN CODE - 410 206 ... RESPONDENTS
.....
Shri S.S. Deve, Advocate for appellant
Shri N.B. Suryawanshi, Advocate for respondents No.1-a to 1-c & 2
.....
WITH
ARBITRATION APPEAL NO.2 OF 2015 WITH
CIVIL APPLICATION NO.1451 OF 2015
Abhyudaya Co-operative Bank Ltd.,
A Multi-state Scheduled Bank
having its Administrative Office at
K.K.Tower, Abhyudaya Bank Lane,
Off. G.D. Ambekar Marg,
Parel Village, Mumbai - 400 012 ... APPELLANT
VERSUS
1. M/s J. Square Steels Pvt. Ltd.,
A company incorporated under the
Companies Act, 1956 and having
its registered office and factory
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Writ Petition No.5528/2010 with
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5
at Gut No.850, 24 Km. Stone,
Aurangabad-Paithan Road,
Bidkin, Tq. Paithan,
District Aurangabad
2. Mr. Vishram N. Ekambe,
R/o PL 5B/10/7, Sector 9,
Khanda Colony,
New Panvel - 410 201
District Raigadh
3. Mr. Rajendra N. Ekambe,
R/o At & Post Krishnapur,
Bidkin, Tq. Paithan,
District Aurangabad.
4. Mr. Balu B. Suryavanshi
R/o At & Post Krishnapur,
Bidkin, Tq. Paithan,
District Aurangabad.
5. Mr. Niranjan Shripatrao Jadhav,
R/o Plot No.18 & 34, CIDCO, N-3,
Aurangabad - 431 003 ... RESPONDENTS
.....
Shri S.S. Deve, Advocate for appellant
Shri V.M. Thorat, Advocate holding for
Shri S.W. Munde, Advocate for respondent No.1.
Shri G.N. Kulkarni, Advocate for respondents No.3 & 4
.....
WITH
ARBITRATION APPEAL NO.3 OF 2015
Mrs. Sanyogita w/o Niranjan Jadhav,
Age 41 years, Occ. Housewife,
R/o Plot No.18 & 34, N-3, CIDCO,
Aurangabad, PIN CODE - 431 003 ... APPELLANT
VERSUS
Abhyudaya Co-operative Bank Ltd.,
K.K. Tower, Abhyudaya Bank Lane,
Off, G.D. Ambekar Marg,
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Writ Petition No.5528/2010 with
connected matters
6
Parel Village, Mumbai - 400 012
through its Branch Office,
Abhyudaya Co-operative Bank Ltd.,
Samdani Chamber, New Gulmandi,
Dalalwadi, Aurangabad - 431 001 ... RESPONDENTS
.....
Shri V.M. Thorat, Advocate holding for
Shri A.V. Patil, Advocate for appellant
Shri S.S. Deve, Advocate for respondent No.1
.....
CORAM: R.D. DHANUKA AND
SUNIL K. KOTWAL, JJ.
Date of reserving judgment : 25th September, 2017
Date of pronouncing judgment :13th October, 2017
JUDGMENT (PER R.D. DHANUKA, J.):
1. By consent of parties, the aforesaid matters were
clubbed and were heard together and are being disposed of by
this common judgment.
2. Writ Petition No.5528/2010 is filed by M/s J. Square
Steel Pvt. Ltd., the principal borrower of Abhyudaya Co-operative
Bank Ltd. has filed the said Writ Petition, interalia praying for a
declaration that Section 84 of the Multi-state Co-operative
Societies Act, 2002 (for short the said Multi-state Act) is
unreasonable, arbitrary and is violative of Article 14 of the
Constitution of India and deserves to be set aside. The petitioner
Writ Petition No.5528/2010 with
connected matters
also seeks a declaration that the Arbitrator is required to be
appointed only after dispute is forwarded by the Bank or anyone
else before the Central Registrar under Section 84 of the Multi-
state Co-operative Societies Act, 2002 and that the Arbitrator
shall be appointed in case to case by applying mind and one
person cannot be appointed as an Arbitrator for the existing
and/or for future disputes. The petitioner also seeks declaration
that the learned Arbitrator Shri S.M. Nadgauda appointed by the
Central Registrar was not appointed in accordance with the
provisions of Section 84 of the Multi-state Act and his appointed
deserves to be quashed and set aside.
3. The petitioner had also amended the Writ Petition and
applied for a declaration that the award dated 25.8.2010, passed
by the learned Arbitrator is null and void in view of his alleged
illegal appointment under Section 84 of the Multi-state Act being
ultra vires to the constitution of India.
4. Civil Application No.4032/2017 is filed by the
petitioner in the said Writ Petition, interalia praying for recall of
the order dated 25.1.2017, passed by this Court to de-tag First
Appeal No.2749/2009, Writ Petition No.5528/2010, Arbitration
Appeal No.1/2015, Arbitration Appeal No.2/2015 and to place
Writ Petition No.5528/2010 with
connected matters
before the appropriate Bench.
5. First Appeal No.2749/2009 is filed by Mrs. Sanyogita
Niranjan Jadhav, the guarantor to the loan given to M/s J. Square
Steel Pvt. Ltd. by the Bank, interalia impugning the order dated
4.9.2009, passed by the learned 3rd Jt. Civil Judge, Senior
Division, Aurangabad, dismissing the plaint filed by the appellant
and allowing the application filed by the Bank for rejection of
plaint under Order VII Rule 11(d) of the Code of Civil Procedure,
1908.
6. Civil Application No.10993/2017 is filed by the
appellant in First Appeal No.2749/2009, interalia praying for
amendment to the First Appeal No.2749/2009 as mentioned in
para No.4 of the Civil Application.
7. Arbitration Appeal No.1/2015 and Arbitration Appeal
No.2/2015 are filed by the Abhyudaya Co-operative Bank Ltd.
impugning the final judgment dated 24.11.2014, passed by the
learned District Judge, allowing the Arbitration Petition filed by
the principal borrower. Arbitration Appeal No.3/2015 is filed by
the guarantor, impugning the part of the order passed by the
learned District Judge under Section 34 of the Arbitration and
Writ Petition No.5528/2010 with
connected matters
Conciliation Act, 1996 (for short the Arbitration Act).
FACTS, SUBMISSIONS AND CONCLUSIONS IN WRIT
PETITION NO.5528/2010
8. Insofar as Writ Petition No.5528/2010 is concerned,
the petitioner had availed of term loan and/or working capital
and other credit facilities from the respondent No.3 Bank i.e.
Abhyudaya Co-operative Bank Ltd. (for short the said Bank) in
the year 2005 vide various agreements entered into between the
parties. The petitioner committed various defaults in making
repayment of the loan and other facilities availed of by the
petitioner from the said bank. The Accounts of the petitioner
became non-performing assets (N.P.A.) as on 15.12.2008. On
1.6.2009, the said Bank issued a notice under Section 13(2) of
the Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2000 (for short the said
SARFAESI Act, calling upon the petitioner to discharge its full
liability to the bank within 60 days from the date of the said
notice and threatened to take possession of the secured assets of
the petitioner.
9. The petitioner filed Writ Petition No.3956/2010 before
this Court and challenged the validity of the said notice issued
under the said SARFAESI Act and prayed that the said Bank be
Writ Petition No.5528/2010 with
connected matters
directed to restructure the Accounts of the petitioner in
accordance with the guidelines framed by the Reserve Bank of
India. The Division Bench of this Court passed an order in the
said Writ Petition, directing the petitioner to deposit 50% of the
total outstanding amount and directed that in the event of the
petitioner failing to deposit the said amount, the Writ Petition
would stand rejected. Admittedly, the said amount has not been
deposited by the petitioner.
10. The said Bank thereafter invoked Section 84 of the
said Multi-state Act and appointed an Arbitrator Shri S.M.
Nadgauda under Section 84 of the said Multi-state Act on
24.8.2009 for adjudication of its claim. The learned Arbitrator
passed an order on 7.9.2009 directing the petitioner and its
guarantors not to create any third party interest on the property
mortgaged with the said Bank and issued a notice to the principal
borrower and also the guarantors. It is the case of the petitioner
that the petitioner thereafter appeared before the learned
Arbitrator by appointing an Advocate and made an application
dated 10.11.2009 before the learned Arbitrator questioning his
jurisdiction to decide the issue. The petitioner also applied for
inspection of the documents by making an application dated
21.12.2009. The petitioner also filed an application on 5.1.2010
Writ Petition No.5528/2010 with
connected matters
under Section 16(2) of the Arbitration Act, raising an issue of
jurisdiction of the learned Arbitrator to try, entertain and decide
the dispute filed by the said bank before the learned Arbitrator.
An issue was raised in the said application that, under Section 84
of the Multi-state Act, there is no provision for filing counter
claim and/or setting up claim against the Bank.
11. On 24.2.2003, the Central Government issued a
notification, thereby delegating the powers of Central Registrar to
the Registrar, Co-operative societies of State in respect of the
appointment of Arbitrator for deciding the dispute between the
said Bank and its members. The petitioner also made an
application dated 9.2.2010 before the learned Arbitrator seeking
various information from the learned Arbitrator. It is the case of
the petitioner that, the said Arbitrator Shri S.M. Nadgauda had
made an application to the respondent bank for being appointed
as an Arbitrator under Section 84 of the Multi-state Act and
based on the said application, the Central Registrar has approved
his name as an Arbitrator in all the disputes which had already
arisen between the respondent bank and its members and also in
the disputes which would arise in future.
12. On 8.3.2010, the petitioner made an application
Writ Petition No.5528/2010 with
connected matters
before the learned Arbitrator to terminate the proceedings. The
petitioner once again made an application dated 15.6.2010
raising the issue of jurisdiction of the learned Arbitrator. It is the
case of the petitioner that the learned Arbitrator did not decide
various applications made by the petitioner before the learned
Arbitrator.
13. Mr. N.B. Suryawanshi, learned counsel for the
petitioner (principal borrower) placed reliance on Section 84(1) of
the Multi-state Act and submits that, under the said provision,
there is no remedy available to the member of the Multi-state
Co-operative Societies to file a claim or counter claim before the
learned Arbitrator appointed under Section 84 of the Multi-state
Act. He relied upon Section 84(4) of the Multi-state Act of the
said Multi-state Act and would submit that, the Arbitrator, if any,
can be appointed only where a dispute has been referred to
arbitration under sub-section (1) of Section 84 and not in
anticipation of the dispute which may arise in future. He submits
that, the Arbitrator has to be appointed in each and every matter
separately and cannot be appointed in respect of all the disputes
which had arisen or may arise between the Multi-state Co-
operative Societies and its members in future. He submits that,
the learned Registrar, in any event, ought to have heard the
Writ Petition No.5528/2010 with
connected matters
petitioner before appointing the learned Arbitrator and could not
have appointed the learned Arbitrator unilaterally. The
appointment of the learned Arbitrator by the Central government
in this case was thus not binding upon the petitioner.
14. Learned counsel also placed reliance on Rule 30 of
the Multi-state Co-operative Societies Rules, 2002 (for short the
said Rules) and would submit that, under the said provision, the
Central Government has granted discretionary powers to appoint
and fix the fees of the Arbitrators subject to the provisions of the
Arbitration and Conciliation Act, 1996. He submits that, the
powers granted to the Central Registrar registered under Section
84(4) of the said Multi-state Act to appoint an Arbitrator
unilaterally is discriminatory and violates Article 14 of the
Constitution of India. Since the said Multi-state Act does not
provide for an equal remedy to the member whereas providing
remedy only to the Multi-state Co-operative Societies Act to
invoke arbitration, is discriminatory and thus, is ultra vires Article
14 of the Constitution of India.
15. Mr. S.B. Deshpande, learned Assistant Solicitor
General appearing for Union of India and the Central Registrar,
on the other hand, invited our attention to Section 84(1)(b) of
Writ Petition No.5528/2010 with
connected matters
the said Multi-state Act and would submit that, under the said
provision, the dispute arising between the member, past member
and persons claiming through a member, past member or
deceased member and the Multi-state Co-operative Societies Act,
its board or any officer, agent or employee of the said Society or
Liquidator touching the constitution, management or business of
a Multi-state Co-operative Society shall be referred to arbitration.
He submits that, it is thus not correct that the claim, if any, of
the petitioner who was admittedly a member of the said bank or
counter claim, if any, of the petitioner, could not have been
referred to arbitration under Section 84 of the Multi-state Act.
16. It is submitted by the learned counsel that, under
Section 84(2) of the Multi-state Act, the disputes which shall be
deemed to be dispute touching the constitution, management or
business of a Multi-state Co-operative Society, is specified in the
said provision, which is only illustrative. The list mentioned
therein is of existing of all the claims, which can be entertained
by the learned Arbitrator appointed under Section 84 of the
Multi-state Act. He submits that, there is no limitation on the
powers of the Central Registrar to appoint an Arbitrator in
general. He submits that, the Central Registrar is not required to
appoint any Arbitrator case to case or only when the dispute
Writ Petition No.5528/2010 with
connected matters
between a Multi-state Co-operative Society and the member
would arise. It is submitted that, the Central Registrar is
competent to appoint Arbitrator for a particular Multi-state Co-
operative Society to deal with all its disputes and it is not
necessary to appoint separate Arbitrator for each case of the
same Multi-state Co-operative Society.
17. Learned Assistant Solicitor General placed reliance on
Section 4(2) of the said Multi-state Act and submits that, under
the said provision, the Central Government is empowered to
issue notification to direct that any power exercisable under the
Central Registrar under the said Multi-state Act are in relation to
such society and such matters as may be specified in the
notification, be exercisable by other officer of the Central
Government or of a State Government as may be authorised by
the Central Government subject to such conditions as may be
specified therein. He submits that, by exercising the said powers
under Section 84 of the Multi-state Act, the Central Government
issued a notification dated 24.2.2003 directing that the powers
exercisable by the Central Registrar under Section 84 of the
Multi-state Act shall also be exercisable by the Registrar of
Cooperative Societies and the State/ Union Territories in respect
of the Societies located in their respective Societies subject to
Writ Petition No.5528/2010 with
connected matters
certain guidelines and conditions as specified in the said
notification. It is submitted by the learned Assistant Solicitor
General that, Shri S.M. Nadgauda alone has not been appointed
as the sole Arbitrator for the petitioner Bank, but Shri A.G. Pandit
and Mrs. Anita Sanjiv Pawar had also been appointed as
Arbitrators for the said Bank. He submitted that, the Central
Registrar is not required to hear any parties before referring the
dispute to Arbitrator under Section 84 of the Multi-state Act.
18. Learned Assistant Solicitor General for the respondent
No.1 and 2 invited our attention to the letter dated 24.9.2010
addressed by the Director (Cooperation) & C.P.T.O. for
Cooperation Division, addressed to Shri Rajendra Ekambe in
response to a request for information under the provisions of
Right to Information Act, 2005. In the said information, it was
provided that the said office complies with all the required legal
formalities and provisions. It is not necessary for the Central
Registrar to appoint separate person as an Arbitrator for different
cases. Arbitrator may either be appointed for a specific case or
for the society to whom they can assign their cases for
arbitration. It was further mentioned that the Managing Director
of the said Abhyudaya Co-operative Bank Ltd. had recommended
the name of 3 persons namely Shri S.M. Nadgauda, A.G. Pandit
Writ Petition No.5528/2010 with
connected matters
and Mrs. Anita Sanjiv Pawar for consideration for appointment as
Arbitrator and of the said Bank. The procedure under Section 84
of the Multi-state Act was followed while appointing the Arbitrator
for the said Bank. It was clarified in the said letter that Shri S.M.
Nadgauda had not been appointed as a sole Arbitrator for the
said Abhyudaya Co-operative Bank Ltd. Shri Pandit and Mrs.
Anita Pawar had also been appointed as Arbitrators for the said
Bank. The said Shri S.M. Nadgauda was appointed by an office
order dated 26.3.2007.
19. Our attention is invited to the order dated 26.3.2007,
thereby appointing Shri S.M. Nadgauda, Advocate as Arbitrator
by the Central Registrar of Cooperative Societies to settle any
dispute other than a dispute regarding disciplinary action taken
by Abhyudaya Co-operative Bank Ltd. against its paid employee
or an industrial dispute touching the constitution, management of
business in the Mumbai region of the said Abhyudaya Co-
operative Bank Ltd. as per provisions of Section 84 of the Multi-
state Act. It was mentioned in the said order that the said
Abhyudaya Co-operative Bank Ltd. had stated that it had a wide
area of operation through 53 Branches in the State of
Maharashtra and thus, the said bank was in need of the
Arbitrator to decide the recovery cases. The Bank had proposed
Writ Petition No.5528/2010 with
connected matters
names of three Advocates for appointment as Arbitrators of the
Bank. By the said order, the Arbitrators came to be appointed.
20. Mr. S.S. Deve, learned counsel for the Bank also
opposed this petition on the ground that the provisions of Section
84 of the Multi-state Act clearly provides remedy of arbitration
not only to Multi-state Co-operative Societies Act but also to its
members. He submits that, the petitioner is admittedly a
member of the said Bank and thus, was entitled to file a separate
claim and/or a counter claim before the same learned Arbitrator
under Section 84(1)(b) of the Multi-state Act. He submits that,
the entire petition is thoroughly misconceived and is filed with
ulterior motive.
21. With the assistance of learned counsel appearing for
the parties, we have perused Section 84 of the Multi-state Act
and various other provisions of the said Act including Section
4(2) of the said Act and also Rule 30 of the said Rules. Under
section 84(1)(a), it is clearly provided that, any dispute between
a member, past member and persons claiming through a
member, past member or deceased member and the Multi-state
Co-operative Society, its board or any officer, agent or employer
of the Multi-state Co-operative Societies Act or liquidator,
Writ Petition No.5528/2010 with
connected matters
touching constitution, management or business of a Multi-state
Co-operative Societies Act, shall be referred to arbitration in
addition to the dispute between various other categories of
persons mentioned in Section 84.
22. It is not in dispute that the petitioner was and is a
member of the said Abhyudaya Co-operative Bank Ltd., which is
a Multi-state Co-operative Societies Act within the meaning of
Section 3(p) of the said Multi-state Act. In our view, the
petitioner being a member of the said Multi-state Act, was not
precluded from filing any claim or counter claim arising out of
dispute touching the business of a Multi-state Co-operative
Societies Act under Section 84(3). If any question arises
whether a dispute referred to arbitration under the provisions of
Section 84 is or is not a dispute touching the constitution,
management or business of a Multi-state Co-operative Societies
Act, the decision thereon of the Arbitrator shall be final and
cannot be called in question in any Court. It is thus clear beyond
reasonable doubt that the petitioner was entitled to make a claim
or counter claim arising out of any such dispute touching the
business of a Multi-state Co-operative Societies Act including the
dispute in respect of a loan transaction availed of by the
petitioner before the learned Arbitrator appointed by the Central
Writ Petition No.5528/2010 with
connected matters
Registrar. We are, thus, not inclined to accept the submission of
the learned counsel for the petitioner that there is no remedy
provided Section 84 of the Multi-state Act or under any other
provision of the said Multi-state Act to the petitioner- member
i.e. borrower under the provisions of the Multi-state Co-operative
Societies Act.
23. A perusal of the record clearly indicates that the
learned Arbitrator, while rejecting various applications filed by
the petitioner, by order dated 6.7.2010, had declared that all the
opponents to the said arbitration claim filed by the said Bank
including the petitioners herein and the guarantors were at
liberty to file their counter claims. In spite of this order passed
by the learned Arbitrator, allowing the petitioner also to file a
counter claim, the petitioner did not file any counter claim.
24. Insofar as the submission of the learned counsel for
the petitioner that the Central Registrar could not have appointed
the learned Arbitrator unilaterally or in anticipation of any
dispute, or ought to have appointed an Arbitrator in each case
separately or could not have appointed an Arbitrator without
giving any opportunity to the petitioner of being heard is
concerned, in our view, there is no merit in this submission of the
Writ Petition No.5528/2010 with
connected matters
learned counsel for the petitioner. Under Section 4(2) of the
Arbitration Act, the Central Government is empowered to issue
notification authorizing any officer of the Central Government or
of a State Government in relation to a Multi-state Co-operative
Societies Act subject to such conditions as may be specified
therein. It is not in dispute that, by exercising such powers
under Section 4(2) of the said Multi-state Act, the Central
Government had issued a notification on 24.2.2003, thereby
directing that the powers exercisable by the Central Registrar
Section 84 of the Multi-state Act shall also be exercisable by
Registrar of Cooperative Societies of the State/ Union Territories
in respect of the Societies located in their respective jurisdiction
subject to certain guidelines and conditions as specified in the
notification.
25. Based on the said notification, the said Bank i.e.
Abhyudaya Co-operative Bank Ltd. had suggested three names of
the Advocates for their appointment as Arbitrators in respect of
the disputes which may arise between the said bank and its
members to the Central Registrar. The Central Registrar
accordingly had appointed those three persons as Arbitrators for
different regions. The said Bank had 53 Branches in the State
having wide area of operation. In our view, the Central Registrar
Writ Petition No.5528/2010 with
connected matters
was thus not required to appoint an Arbitrator in respect of each
dispute separately and that also only after such dispute would
have arisen. The Central Registrar is empowered to appoint an
Arbitrator Section 84(4) of the Multi-state Act in respect of each
Multi-state Cooperative Society separately, whether in respect of
the existing disputes on the date of such appointment or the
disputes which may arise in future on various terms and
conditions. These appointments made by the Central Registrar
are for a specified period. Such Arbitrators who are appointed by
the Central Registrar Section 84(4) of the Multi-state Act in
respect of a particular Multi-state Co-operative Society is
empowered to deal with all such disputes contemplated Section
84 of the Multi-state Act as and when the dispute arises. Such
disputes are mandatorily required to be referred to such
Arbitrators who are appointed by the Central Registrar whenever
such dispute arises.
26. There is, thus, no merit in this submission of the
learned counsel for the petitioner that the Central Registrar was
under an obligation to grant personal hearing to the petitioner
before appointing any Arbitrator Section 84(4) of the Multi-state
Act or that, the Arbitrator could be appointed only case to case or
only after a dispute would actually arise and an application for
Writ Petition No.5528/2010 with
connected matters
appointment or Arbitrator is made by the Multi-state Co-
operative Society after effecting service of said application upon
the member.
27. In our view, the constitutional validity of Section 84,
challenged by the petitioner is thoroughly misconceived and is
obviously filed with a view to delay the other proceedings
pending between the parties. The petitioner not having availed
of the opportunity granted by the learned Arbitrator to file
counter claim, cannot be allowed to contend that there was no
remedy available to the petitioner/ member to file a claim or
counter claim Section 84 of the Multi-state Co-operative Societies
Act. In our view, thee is no merit in this Writ Petition
No.5528/2010. This Writ Petition deserves to be dismissed.
28. Insofar as Civil Application No.4032/2017 filed by the
applicant (original petitioner) interalia praying for recall of the
order dated 25.1.2017 passed by this Court is concerned, since
all the proceedings were clubbed together in view of the
administrative order passed by the learned seniormost Judge
stationed at Aurangabad, and pursuant to the said administrative
order, all the proceedings were heard together, this Civil
Application does not survive and is accordingly dismissed.
Writ Petition No.5528/2010 with
connected matters
FACTS, SUBMISSIONS AND CONCLUSIONS IN
FIRST APPEAL NO.2749/2009
The parties described in this order insofar as this First
Appeal is concerned, are described as per their original status in
Special Civil Suit No.337/2009.
29. This First Appeal is filed by the guarantor, who is wife
of the Chief Executive Officer of M/s J. Square Steels Pvt. Ltd.,
who was the principal borrower, who had obtained various loans
and other facilities from the Abhyudaya Co-operative Bank Ltd.
The appellant was the original plaintiff in Special Civil Suit
No.337/2009 whereas the principal borrower M/s J. Square
Steels Pvt. Ltd. was defendant No.1 and Abhyudaya Co-operative
Bank Ltd. was the defendant No.2. The plaintiff is the owner and
possessor of property bearing Flat No.401, admeasuring 950
sq.ft. of Godawari Building, situated at Worli Sagar Co-operative
Housing Society, Worli, Mumbai and was a guarantor and co-
mortgagor. It was the case of the plaintiff that, the defendant
No.2 Bank had changed, substituted, altered and modified the
terms of the original contract entered into with defendant No.1
and as a result thereof, the plaintiff was exonerated from the so
called liability arising out of the said transaction.
Writ Petition No.5528/2010 with
connected matters
30. It was the case of the plaintiff that defendant No.2
Bank had not informed the plaintiff about the changes in the
terms of the contract and had seriously violated the statutory
and contractual rights of the plaintiff. It was alleged that, the
defendant No.2 Bank had made the defendant No.1 to divert the
funds granted to it without the consent and concurrence of the
plaintiff. The undue allowance and accommodation granted to
the defendant No.1 was against the interest of the plaintiff and
the spirit of the contracts of loan. The diversion was illegal and
resulted in substitution of the main contracts of loan. According
to the plaintiff, the said act on the part of the Bank amounted to
complete substitution of a new contract in place of the old
contract.
31. On 5.8.2009, the plaintiff accordingly filed the suit
against the principal borrower of the Bank being Special Civil Suit
No.337/2009 before the learned Civil Judge, Senior Division,
Aurangabad interalia praying for a declaration that the guarantee
documents shown to have been executed by the plaintiff in
favour of defendant No.2 for securing the loan advanced to
defendant No.1 are void for want of observance and fulfillment of
the statutory and contractual duties on the part of the Bank. The
Writ Petition No.5528/2010 with
connected matters
plaintiff also sought declaration that the plaintiff stood
exonerated from the so called liability due to alleged change,
substitution, alterations and modification of the terms of the loan
contracts and the Bank having advanced the loan facilities to the
defendant No.1 without the consent and concurrence of the
plaintiff. The plaintiff applied for a declaration that the contract
or mortgage alleged to have been executed by the plaintiff in
favour of the Bank was void and unenforceable.
32. On 14.8.2009, the defendant No.2 filed an application
under Order VII Rule 11(d) of the Code of Civil Procedure, 1908
in the said Special Civil Suit No.337/2009 filed by the plaintiff,
interalia praying for rejection of the plaint and dismissal of the
suit on various grounds. It was contended in the said application
that, the plaintiff had not given mandatory notice as per Section
115 of the Multi-state Co-operative Societies Act, 2002 though
defendant No.2 is a Multi-state Co-operative Society under the
provisions of the said Multi-state Act. The said application was
also filed on the ground that the action initiated by the Bank
under the provisions of SARFAESI Act could not be subject
matter of the said suit in view of the specific bar of Civil Court to
entertain any suit and more particularly under Section 34 of the
SARFAESI Act.
Writ Petition No.5528/2010 with
connected matters
33. The defendant No.2 also contended in the said
application that the remedy of the plaintiff was under Section 84
of the Multi-state Co-operative Societies Act and thus, the said
suit was clearly barred. The plaintiff filed a reply to the said
application filed by the Bank under Order VII Rule 11(d) of the
Code of Civil Procedure, 1908. The plaintiff denied the
contentions raised by the defendant No.2 in the said application.
The plaintiff did not dispute that no notice under Section 115 of
the Multi-state Co-operative Societies Act was issued by the
plaintiff to the defendant No.2 Bank before filing the said suit.
34. By an order dated 4.9.2009, passed by the learned
3rd Jt. Civil Judge, Senior Division, Aurangabad, the said
application (Exh.14) filed by the defendant No.2 under Order VII
Rule 11(d) of the Code of Civil Procedure, 1908 came to be
allowed. The learned trial Judge held that the plaintiff had not
issued a notice under Section 115 of the Multi-state Co-operative
Societies Act, 2002. the plaint was thus expressly barred by the
provisions of the Multi-state Co-operative Societies Act, 2002. It
is held that, the dispute between the plaintiff and defendant No.2
was touching the business of the society and has to be referred
to the arbitration and thus, the said suit could not be entertained
Writ Petition No.5528/2010 with
connected matters
before a Civil Court. The learned trial Judge made various
observations against the plaintiff. Being aggrieved by the said
order dated 4.9.2009, the plaintiff filed this First Appeal.
35. Mr. Thorat, learned counsel for the plaintiff submits
that, the defendant No.2 Bank had made various changes in the
conditions of contract entered into between the Bank and the
defendant No.1 without prior consent of the plaintiff. There was
no efficacious remedy available under the provisions of the Multi-
state Co-operative Societies Act, 2002 and more particularly
under Section 84, to the plaintiff to file a claim or counter claim
for seeking the reliefs which were claimed by the plaintiff in the
said Special Civil Suit No.337/2009. He submits that, the suit
thus filed by the plaintiff was maintainable before the learned
trial Judge and could not have been rejected by the learned trial
Judge. He submits that, under Section 84 of the Multi-state Act,
the guarantor could not have filed any claim or counter claim
before the learned Arbitrator. He submits that, civil proceedings
are not barred if remedy under the specific Act such as Multi-
state Co-operative Societies Act, 2002 is not efficacious. He
submits that, even otherwise, the plaintiff could not have filed
any proceedings before the learned Arbitrator in view of their
being split of causes of action.
Writ Petition No.5528/2010 with
connected matters
36. It is submitted that, the defendant No.2 had issued a
notice under Section 13(2) of the SARFAESI Act on 1.6.2009.
The plaintiff had filed the said civil suit bearing Special Civil Suit
No.337/2009 on 5.8.2009. The defendant No.2 Bank had filed its
claim before the learned Arbitrator on 21.8.2009. He invited our
attention to some of the averments made by the plaintiff to the
application filed by the defendant No.2 under Order VII Rule
11(d) of the Code of Civil Procedure, 1908. He submits that, the
subject matter of the suit filed by the plaintiff was not covered by
any of the provisions under Section 84 of the Multi-state Act. He
submits that, since the plaintiff has challenged the illegal acts of
the defendant No.2, the civil suit was maintainable.
37. It is submitted that, no modalities under the Multi-
state Act are provided to implement the remedies provided
therein. He submits that, the subject matter of the suit does not
touch the business of the society and thus, was maintainable and
not barred. He submits that, no part of Section 84 applies to the
plaintiff and thus, plaintiff was not required to invoke Section 84
of the Multi-state Act. Reliance is placed on Section 85 of the
Multi-state Act. It is submitted that, there are different periods
of limitations provided under Section 85 to the Multi-state Co-
Writ Petition No.5528/2010 with
connected matters
operative Societies Act and to the members. The member has to
wait for filing a counter claim till the Multi-state Co-operative
Societies Act would have filed its claim before the learned
Arbitrator. Both the parties are not granted equal rights Section
85 of the Multi-state Act.
38. Insofar as the issue as to whether notice under
Section 115 of the Multi-state Act was required to be issued to
the defendant No.2 Bank before filing such suit or not is
concerned, it is submitted that, since the dispute raised by the
plaintiff did not touch the business of the defendant No.2 Bank,
the plaintiff could not have filed any claim or counter claim under
Section 84 of the Multi-state Act before the learned Arbitrator.
The learned trial Court, however, did not deal with this issue at
all in the impugned order.
39. Learned counsel for the plaintiff placed reliance on
the judgment of Supreme Court in case of Shiv Kumar Chadha
& ors. Vs. Municipal Corporation of Delhi & ors. [(1993) 3
SCC 161] and in particular para No.23, the judgment of
Supreme Court in case of Rajasthan State Road Transport
Corporation & anr. Vs. Bal Mukund Bairwa [(2009) 4 SCC
299] and in particular para No.24, judgment of Supreme Court
Writ Petition No.5528/2010 with
connected matters
in case of Dhulabhai & ors. Vs. The State of Madhya
Pradesh & anr. [AIR 1978 SC 78] and on the judgment of
Supreme Court in case of Sukanya Holdings Pvt. Ltd. Vs.
Jayesh H. Pandya & anr. [AIR 2003 SC 2252] in support of
his aforesaid submissions.
40. Learned counsel for the Bank, on the other hand,
submits that under Section 84(1)(b) of the Multi-state Act, the
dispute between the member of the Multi-state Co-operative
Society touching the business of society has to be referred to
arbitration. There is no other remedy available to the member.
He submits that, the plaintiff was admittedly a member of the
defendant No.2 Bank. Learned Arbitrator had already allowed all
the respondents therein including the plaintiff herein, to file
counter claim by an order dated 6.7.2010. However, the plaintiff
had filed the suit on 5.8.2009. He submits that, even before the
Bank could have invoked provisions of Section 84 of the Multi-
state Act, the plaintiff could have independently invoked Section
84 of the Multi-state Act. He submits that, the prayers sought in
the plaint were governed by Section 84 of the Multi-state Act and
could be entertained only by an Arbitrator. There were no split of
cause of action as sought to be canvassed by the learned counsel
for the plaintiff.
Writ Petition No.5528/2010 with
connected matters
41. It is submitted by the learned counsel that, the
learned trial Judge has passed a reasoned order and has rightly
accepted the contentions raised by the defendant No.2 in the
application filed under Order VII Rule 11(d) of the Code of Civil
Procedure, 1908. The defendant No.2 being a Multi-state Co-
operative Society, notice under Section 115 of the Multi-state Act
was mandatory before filing such suit.
42. It is submitted by the learned counsel that, the
plaintiff has efficacious and proper remedy under Section 84 of
the Multi-state Act and thus, the suit filed by the plaintiff was
barred under the provisions of the Multi-state Act. The learned
counsel appearing for defendant No.2 distinguished the
judgments relied upon by Mr. Thorat, learned counsel for the
plaintiff. It is submitted by the learned counsel that, the
husband of the plaintiff who was Chief Executive Officer of the
principal borrower, has been giving instructions to the learned
counsel for the plaintiff. He submits that, the collusion is
between the plaintiff and her husband, who represents the
principal borrower and not between the principal borrower and
the Bank, as sought to be canvassed by the learned counsel for
the plaintiff.
Writ Petition No.5528/2010 with
connected matters
43. Learned counsel for the Bank submits that, the
plaintiff was fully aware of the transactions between the
defendant No.1 and defendant No.2 and had filed a false suit
before the Civil Court which was not maintainable. Learned
counsel invited our attention to various findings rendered and
observations made in the impugned order passed by the learned
trial Judge rejecting the plaint filed by the plaintiff about the
conduct of the plaintiff. It is held that, the remedy of the
defendant No.1 to challenge the notice under Section 13(2) of
the Securitisation Act was only before the Debts Recovery
Tribunal under Section 17 of the said Act. The plaintiff herself
was a member of the defendant Bank. The learned trial Judge
also held that the dispute raised by the plaintiff in the present
suit is the dispute touching the business of the defendant No.2
Bank. All the guarantors were residing together and hail from
one and the same family.
44. Insofar as submissions of the learned counsel for the
plaintiff that remedy under Section 84 of the Multi-state Act is
not an efficacious remedy available to the plaintiff - guarantor or
there is no remedy under Section 84 of the said Act at all is
concerned, in our view, this submission of the learned counsel is
Writ Petition No.5528/2010 with
connected matters
contrary to Section 84(1)(b) of the Multi-state Act. It is not in
dispute that the plaintiff was and is a member of the defendant
No.2 Bank and was a member on the date of filing the suit.
Under Section 84(1)(b), any dispute between the member of the
Multi-state Co-operative Societies Act touching the business of
the society has to be referred to arbitration under Section 84.
The reliance sought by the plaintiff in the plaint was touching the
business of the defendant No.2 Bank. The guarantee given by
the plaintiff and the mortgage created in respect of the flat in
question in favour of the defendant No.2 Bank was in respect of
the loan transaction between the defendant No.2 and the
defendant No.1, which was a business of the defendant No.2
Bank.
45. In our view, all the reliefs thus claimed by the
plaintiff in the suit were touching the business of the society and
could be only resolved by the learned Arbitrator under Section 84
of the Multi-state Act. There is, thus, no merit in the submission
of the learned counsel for the plaintiff that the reliefs as prayed
in the plaint could be granted only by the Civil Court and not by
the Arbitrator. There was no split of cause of action as sought to
be canvassed by learned counsel for the plaintiff.
Writ Petition No.5528/2010 with
connected matters
46. Under Section 115 of the Multi-state Co-operative
Societies Act, the notice to the Multi-state Co-operative Society is
mandatory before filing the suit. Admittedly, no such notice was
issued by the plaintiff as contemplated under Section 115 of the
said Act. In our view, no acts of the defendant No.2 Bank were
outside the business of the defendant No.2 Society which were
impugned by the plaintiff in the said Special Civil Suit. The
Division bench of this Court, in the order dated 26.2.2010 in Writ
Petition filed by Mrs. Smita Vaibhav Muley, Mr. Arif Shaikh
Mahboob Shaikh & anr. filed by the principal borrower against the
Union of India and the defendant No.2 Bank and other Banks, in
which those parties had challenged the proposed coercive action
of the Bank under the provisions of SARFAESI Act, had imposed
condition against the petitioners therein to pay at least 50% of
the outstanding dues as on the date of said order to the Bank
within four weeks from the date of the said order.
47. It was made clear that if the amount was not paid as
directed, the interim protection would stand vacated and those
Writ Petitions would stand dismissed for non prosecution. In the
said order, it was made clear that the Banks were fully
empowered to pursue their claim against the petitioner by
invoking remedy under Section 84 of the Multi-state Co-operative
Writ Petition No.5528/2010 with
connected matters
Societies Act which remedy by no standard was less efficacious.
The Banks were permitted to take recourse to that remedy in
spite of pendency of those Writ Petitions. Admittedly, none of
the petitioners in the said Writ Petitions paid any amount to the
Bank as directed by the division Bench of this Court and thus, all
those petitions were dismissed due to non-compliance of the
conditional order passed by this Court.
48. In our view, the learned trial Judge rightly rejected
the plaint on the ground that notice under Section 115 of the
Multi-state Act was mandatory before filing the suit against the
defendant No.2 Bank in respect of the dispute touching the
business of the Multi-state Co-operative Societies Act also on the
ground that the only remedy of the plaintiff was to file claim
under Section 84 of the Multi-state Act. The learned trial Judge
also rightly held that the action on the part of the Bank under
Section 13(2) of the Securitisation Act could not have been
challenged before the Civil Court and was clearly barred under
Section 34 of the SARFAESI Act.
49. Insofar as judgment of the Supreme Court in case of
Shiv Kumar Chadha & ors. (supra) relied upon by the learned
counsel for the plaintiff is concerned, the Supreme Court has held
Writ Petition No.5528/2010 with
connected matters
that, the ouster of the jurisdiction of the Court is upheld on the
finding that the rights and liabilities in question had been created
by the Act in question and the remedy provided therein was
adequate. In our view, this judgment of the Supreme Court
would assist the case of the Bank and not the plaintiff. In view of
the specific remedy available under Section 84 of the Multi-state
Act to the Multi-state Co-operative Societies Act and also to all its
members in respect of the dispute touching the business of the
society, civil suit in respect of such dispute was not maintainable.
The defendant No.2 had thus rightly filed an application for
rejection of plaint under Order VII Rule 11(d) on that ground and
various other grounds.
50. Insofar as judgment of Supreme Court in case of
Rajasthan State Road Transport Corporation & anr. (supra) relied
upon by the learned counsel for the plaintiff is concerned, it is
held by the Supreme Court that, when there is a doubt as to
whether Civil Court has jurisdiction to try a suit or not, the Court
shall raise a presumption that it has such jurisdiction. In our
view, the provisions under Section 84 of the Multi-state Act are
very clear which provide that the dispute between a member and
the Multi-state Co-operative Society touching the business of
society has to be referred to arbitration to be appointed by the
Writ Petition No.5528/2010 with
connected matters
Central Registrar. The claim includes counter claim. The plaintiff
thus ought to have filed her claim or counter claim before the
learned Arbitrator by invoking Section 84 of the Multi-state Act.
51. We are not inclined to accept the submission of the
learned counsel for the plaintiff that the plaintiff could not have
filed a claim or counter claim till such time the defendant No.2
Bank would have filed its claim under Section 84 of the Multi-
state Act. In our view, the plaintiff being a member of the
defendant No.2 Bank and if according to the plaintiff the dispute
had arisen in respect of the loan transaction, pursuant to which
she had executed a guarantee and had mortgaged her flat to
secure the said loan, could have filed her claim even before the
Bank would have filed its claim by invoking Section 84 of the
Multi-state Act. In our view, the plaintiff thus could not have
filed the said Special Civil Suit No.337/2009 for the reliefs
covered for the disputes which were covered by the disputes
contemplated under Section 84.
52. There is no merit in the submission of the learned
counsel for the plaintiff that there is any discrimination under
Section 85 insofar as period of limitation in filing proceedings by
a member or by a Multi-state Co-operative Society is concerned.
Writ Petition No.5528/2010 with
connected matters
Be that as it may, the defendant No.2 had not raised any plea of
limitation in the said suit filed by the plaintiff. The plaintiff has
not even raised this issue in this appeal.
53. Insofar as judgment of Supreme Court in case of
Dhulabhai & ors. (supra) relied upon by the learned counsel for
the plaintiff is concerned, the Supreme Court has held that
challenge to provisions of the Act as ultra vires cannot be
brought before the Tribunals. Admittedly, the plaintiff has not
challenged the constitutional validity of any of the provisions of
the Multi-state Co-operative Societies Act, 2002 in the plaint.
The husband of the plaintiff has filed a separate Writ Petition
challenging the vires of Section 84 of the Multi-state Act, 2002.
The judgment of Supreme Court in case of Dhulabhai & ors.
(supra) relied upon by the plaintiff would not even remotely
assist the case of the plaintiff.
54. Insofar as judgment of the Supreme Court in case of
Sukanya Holdings (supra) relied upon by the learned counsel for
the plaintiff is concerned, in our view, since the reliefs which
were subject matter of the plaint arising out of the dispute in
respect of the loan transaction including the execution of
guarantee and mortgage deed, was touching the business of the
Writ Petition No.5528/2010 with
connected matters
defendant No.2 Society and also the disputes covered by the
disputes contemplated under Section 84, the same could be
decided only by invoking Section 84 of the Multi-state Act, which
is a statutory arbitration contemplated under the provisions of
the said Act. There was no split of any cause of action as sought
to be canvassed by learned counsel for the plaintiff. No relief
was claimed by the plaintiff against the defendant No.1 in the
said suit. The judgment of the Supreme Court in case of
Sukanya Holdings (supra) relied upon by the plaintiff, thus, is
clearly distinguishable in the facts of the present case and would
not advance the case of the plaintiff.
55. A perusal of the record indicates that, there is a clear
case of collusion between the plaintiff and the defendant No.1.
The learned counsel who appeared for the plaintiff in this First
Appeal, and appeared for the defendant No.1 (principal
borrower), whose Chief Executive Officer is husband of the
plaintiff in Writ Petition No.5528/2010, which was filed by the
principal borrower. During the course of hearing of these
matters, the husband of the plaintiff was present all throughout
and was giving instructions to the learned counsel Shri V.M.
Thorat, who appeared for the plaintiff in this First Appeal. The
collusion between plaintiff and the defendant No.1 through the
Writ Petition No.5528/2010 with
connected matters
Chief Executive Officer is apparent. It is clear that, the plaintiff
has been put up by the defendant No.1 who had not even
challenged the arbitral award rendered by the learned Arbitrator
against defendant No.1.
56. In our view, there is no infirmity with the order
passed by the learned trial Judge rejecting the plaint in its
detailed reasoned order. The First Appeal, thus, deserves to be
dismissed.
57. Learned counsel for the Bank invited our attention to
the order dated 11.8.2017, passed by the Division Bench of this
Court in Civil Application No.9664/2017 with Civil Application
No.8584/2017 in First Appeal Nos.2749/2009 rejecting Civil
Application Nos.9664/2017 and 8584/2017 and observing that
the applicant (i.e. Mr. Sanyogita Niranjan Jadhav had suppressed
the conditions imposed by the Government while granting lease
in respect of the said plot on which the mortgaged Flat was
constructed and had obtained loan and had created mortgage
and thus, relief of injunction sought by the applicant could not be
granted.
58. Insofar as Civil Application No.10993/2017 in First
Writ Petition No.5528/2010 with
connected matters
Appeal No.2749/2009 filed by the guarantor Mrs. Sanyogita
Niranjan Jadhav, interalia praying for amendment of the First
Appeal No.2749/2009 is concerned, the learned counsel for the
Bank submits that, the applicant in the Civil Application has
sought to bring the additional allegations in the appeal
proceedings which is not permissible in law. He submits that, the
applicant had also filed an application under Section 9 of the
Arbitration and Conciliation Act, 1996 seeking relief against
SARFAESI action taken by the Bank in respect of the mortgaged
flat of the applicant.
59. By a detailed order dated 26.7.2010, the said
application filed by the application under Section 9 of the
Arbitration and Conciliation Act, 1996 came to be rejected. The
said order was not challenged by the applicant. The applicant,
thus, cannot seek any amendment in the First Appeal at this
stage to introduce new and additional facts which were not
germane to the issue in question and more particularly after
eight years of filing the First Appeal. He submits that, the
Principal District Judge, Aurangabad, in the said order dated
26.7.2010, while dismissing the application filed under Section 9
of the Arbitration and Conciliation Act, 1996 by the applicant, has
already rendered various findings about the execution of the
Writ Petition No.5528/2010 with
connected matters
deed of mortgage and also about the conduct of the applicant.
FACTS, SUBMISSIONS AND CONCLUSIONS IN
ARBITRATION APPEAL NOS.1/2015, 2/2015 AND 3/2015
60. All the aforesaid three appeals are arising out of the
order and judgment delivered by the learned Principal District
Judge, Aurangabad, thereby setting aside the impugned award
dated 25.8.2010 and remanding back the Arbitration Case
No.ARB/ACB/392/2009 for fresh hearing on all points. In the
Arbitration Appeal Nos.1/2015 and 2/2015, the Bank has
impugned the entire order and judgment dated 24.11.2014. In
Arbitration Appeal No.3/2015, the guarantor Mrs. Sanyogita
Niranjan Jadhav, has impugned the order and judgment insofar
as the arbitration proceedings are remanded by the learned
Principal District Judge to the learned Arbitrator for fresh
consideration is concerned. It is thus clear that, insofar as order
of remand of the arbitration proceedings by the learned Principal
District Judge for fresh consideration is concerned, that part of
the order is impugned by the Bank as well as by the guarantor.
61. Some time in the year 2006, the principal borrower
M/s J. Square Steel Pvt. Ltd. was granted various credit facilities
by the Abhyudaya Co-operative Bank Ltd. on execution of various
Writ Petition No.5528/2010 with
connected matters
documents. Mrs. Sanyogita Niranjan Jadhav, the guarantor
herein, along with other guarantors, had executed a deed of
guarantee. The said Mrs. Sanyogita Niranjan Jadhav had also
executed a deed of mortgage, thereby mortgaging her Flat,
situated at Worli in favour of the Bank. The said M/s J. Square
Steel Pvt. Ltd. committed default in making repayments of duties
of the Bank in the month of September 2008. The said principal
borrower admitted its liability of the Bank. Some time in the
month of June 2009, the Bank issued a statutory notice under
Section 13(2) of the SARFAESI Act to the principal borrower and
also the guarantors. The said statutory notice was challenged by
the principal borrower on 23.6.2009 before this Court by filing a
Writ Petition.
62. In the month of August 2009, the Bank filed a dispute
under Section 84 of the Multi-state Act against the principal
borrower as well as its guarantors before the learned Arbitrator
appointed by the Central Registrar. The principal borrower as
well as the guarantors were served with the summons issued by
the learned Arbitrator. In the month of August 2009, the
guarantor Mrs. Sanyogita Niranjan Jadhav filed a civil suit for
various reliefs including a declaration that she had stood
exonerated in view of the alleged violation in the terms and
Writ Petition No.5528/2010 with
connected matters
conditions in the loan agreement. On 4.9.2009, the learned
District Judge rejected the plaint on an application filed by the
Bank under Order VII Rule 11(d) of the Code of Civil Procedure,
1908. In the said order, it was observed that the respondent
No.2 i.e. Mrs. Sanyogita Niranjan Jadhav is wife of Chief
Executive Officer of the principal borrower. The Company's
registered address of the principal borrower as well as the
residential address of respondent No.1 and 2 as well as
residential address of the Chief Executive Officer at Mumbai are
same.
63. On 20.3.2010, the Chief Metropolitan Magistrate
passed an order under Section 14 of SARFAESI Act against the
mortgaged property of respondent No.2. By an order dated
5.5.2010, the respondent No.2 guarantor approached this Court
for seeking various reliefs against the Bank. By an order dated
5.5.2010, this Court granted liberty to the guarantor to approach
the learned Arbitrator and also granted liberty to seek
appropriate interim relief under Section 9 of the Arbitration and
Conciliation Act, 1996.
64. The Central Registrar appointed the learned
Arbitrator under Section 84(4) of the Multi-state Act. Summons
Writ Petition No.5528/2010 with
connected matters
were served on the principal borrower as well as on the
guarantors. Mrs. Kanchan Kambli, Advocate filed Vakalatnama
for opponent Nos.1 to 3, 6 and 8 before the learned Arbitrator.
The other opponents remained absent though served. None of
the opponents filed their written statement and chose to remain
absent.
65. Insofar as the respondent No.2 guarantor is
concerned, she filed several applications before the learned
Arbitrator, raising various issues including issue of jurisdiction
and various other issues. She also applied for inspection of
documents. Though various applications were filed by the
respondent No.2 through her Advocate, the respondent No.2, her
Advocate as well as other respondents did not appear before the
learned Arbitrator. By an order dated 6.7.2010, the learned
Arbitrator rejected various applications filed by the respondent
No.2 for inspection and raising issue of jurisdiction of the learned
Arbitrator and for other reliefs.
66. The respondent No.2 thereafter made some more
applications before the learned Arbitrator. On 25.8.2010, the
learned Arbitrator made an exparte award against all the
opponents including the respondent No.2 herein i.e. Mrs.
Writ Petition No.5528/2010 with
connected matters
Sanyogita Niranjan Jadhav and directed all the opponents
including the respondent No.2 to pay sum of
Rs.31,88,23,876=49 to the Bank. It was, however, made clear
that, the individual liability of Mr. Niranjan S. Jadhav i.e. husband
of guarantor and Mr. Malu B. Suryawanshi shall be limited to
Rs.30,02,99,649=49 and Rs.49,81,134 respectively. The
respondents were also directed to pay interest and arbitration
fees. The learned Arbitrator declared that those liabilities were
secured by mortgage of various properties. Insofar as
respondent No.2 is concerned, the Flat No.401, admeasuring 950
sq.ft., situated at Godawari Building, Worli Sagar Co-operative
Housing Society Ltd. was mentioned. The learned Arbitrator
declared that, the bank was entitled to realize the dues by selling
the mortgaged and hypothecated assets.
67. Being aggrieved by the said award, the opponents
filed two separate applications under Section 34 of the Arbitration
and Conciliation Act, 1996 before the learned Principal District
Judge at Aurangabad. By an order and judgment dated
24.11.2014 passed by the learned Principal District Judge, the
petitions filed by the opponents were allowed. The impugned
award dated 25.8.2010 came to be set aside. However, while
setting aside the impugned award, the learned Principal District
Writ Petition No.5528/2010 with
connected matters
Judge remanded the matter back to the learned Arbitrator for
fresh hearing on all points and directed to dispose of the
proceedings within six months from the date of receipt of the
order. Being aggrieved by the said order and judgment dated
24.11.2010, the Bank filed two separate arbitration appeals
under Section 37 of the Arbitration and Conciliation Act, 1996
whereas the respondent No.2 filed a separate arbitration appeal
i.e. Arbitration Appeal No.3/2015. The principal borrower did not
file any separate arbitration appeal.
68. Mr. Thorat, learned counsel for the appellant in
Arbitration Appeal No.3/2015 and for respondent No.2 in
Arbitration Appeal Nos.1/2015 and 2/2015 invited our attention
to various applications filed by the respondent No.2 before the
learned Arbitrator for seeking inspection of various documents
and also challenging the jurisdiction of the learned Arbitrator
under Section 16 of the Arbitration and Conciliation Act, 1996,
copy of the order passed by the learned Arbitrator rejecting most
of those applications and also the order passed by the learned
Principal District Judge. It is submitted by the learned counsel
that, though the suit filed by the respondent No.2 before the Civil
Court for a declaration that the deed of guarantee and other
documents executed by her were not binding upon her in view of
Writ Petition No.5528/2010 with
connected matters
the alleged novation of the contract and she was exonerated
from making any payment to the Bank under those documents,
the learned Arbitrator proceeded with the arbitral proceedings
and passed an exparte award.
69. It is submitted by the learned counsel that, the
learned Arbitrator could not have been appointed by the Central
Registrar without hearing his client and in any event in
anticipation of the dispute having arisen. He submits that, the
appointment of the Arbitrator was totally illegal. The remedy of
the respondent No.2 was not under Section 84 of the Multi-state
Act or in any event the said remedy was not efficacious and thus,
the entire arbitral proceedings were without jurisdiction. The
Bank was under an obligation to disclose the details of claim, the
names of parties before the Central Registrar while making a
request for appointment of Arbitrator. The Central Registrar was
under an obligation to give notice to the parties, hear objections,
if any, from the parties and only thereafter could have appointed
an Arbitrator. Only convenience of the Bank could not be
considered. The powers of the Central Registrar ought to have
been exercised by him in spirit of Section 84 of the Multi-state
Act. The impugned order passed by the learned Central Registrar
was in violation of principles of natural justice.
Writ Petition No.5528/2010 with
connected matters
70. It is submitted by the learned counsel that, even the
application for seeking inspection of the documents sought by his
client from the Bank also came to be rejected. He submits that,
the learned Arbitrator proceeded with the proceedings exparte
and without hearing his client, has passed an exparte award in
violation of principles of natural justice. He submits that, the
learned Principal District Judge ought to have simplicitor set
aside the arbitral award and could not have remanded the matter
back to the learned Arbitrator for fresh disposal.
71. It is submitted by the learned counsel that, even if
the respondent No.2 could be governed by the provisions of
Section 84 of the Multi-state Act, the learned Arbitrator did not
give opportunity to file written statement and counter claim to
his client. It is submitted that, the learned Arbitrator has not
decided number of applications filed by his client. He tenders a
copy of the list showing such applications which were alleged to
have been made by the respondent No.2 and were not decided
by the learned Arbitrator before passing an award. It is
submitted by the learned counsel that the loan was not granted
by the Bank to the husband of the respondent No.2 but was
granted to the Company, of which her husband was Chief
Writ Petition No.5528/2010 with
connected matters
Executive Officer.
72. It is submitted by the learned counsel that,
appointment of the Arbitrator could be challenged by his client at
any stage. In support of his submission that the appointment of
the learned Arbitrator was illegal, the learned counsel placed
reliance on the judgment delivered by learned Single Judge of
this Court on 26.9.2011 in Writ Petition No.7408/2011 in case of
Deshbhakta Ratnappanna Kumbhar Panchganga Sahakari Sakhar
Karkhana Maryadit Vs. Shri Ramesh Bhupal Chowgule & ors., and
would submit that, the appointment of the Arbitrator by the
Central Registrar without hearing the respondent No.2 was illegal
and without jurisdiction and thus, the entire arbitration
proceedings were vitiated.
73. Learned counsel appearing for the respondent No.2
placed reliance on the judgment of this Court in case of Indian
Overseas Bank Shreekrishna Woollen Mills Pvt. Ltd. [AIR
1988 Bom. 343] in support of his submission that the Bank was
under an obligation to give inspection of the documents referred
and relied upon by the Bank to the respondent No.2 before filing
of any written statement, without which the respondent No.2
could not have filed the written statement. The learned
Writ Petition No.5528/2010 with
connected matters
Arbitrator thus ought to have directed the Bank to permit
inspection of all the documents to the respondent No.2 and
thereafter ought to have given an opportunity to the respondent
No.2 to file a written statement. He submits that, since the suit
for declaration that the respondent No.2 was exonerated from
any liability was based on the documents referred to and relied
upon by the Bank was pending when the arbitration proceedings
were going on, the learned Arbitrator could not have proceeded
with the proceedings and could not have rendered an arbitral
award.
74. Learned counsel for the Bank, on the other hand,
submits that, admittedly all the opponents in the arbitration
proceedings were served with the summons by the learned
Arbitrator and were granted several opportunities to remain
present before him and to file written statement and counter
claim. He submits that, while rejecting the false and frivolous
applications filed by the respondent No.2, the learned Arbitrator,
though at initial stage, had passed an order of "No Written
Statement", recalled the said order and had granted one more
opportunity in spite of gross delay on the part of respondent No.2
and other opponents and had also granted the liberty to file
counter claim. The respondent No.2, however, did not appear
Writ Petition No.5528/2010 with
connected matters
before the learned Arbitrator though had engaged an Advocate
and did not file written statement or counter claim in spite of
several opportunities granted by the learned Arbitrator.
75. It is submitted by the learned counsel that the
learned Arbitrator, after considering the material on record, had
rightly allowed the claims made by the Bank against all the
opponents including the respondent No.2. He submits that, the
impugned order passed by the learned Principal District Judge is
totally erroneous. The findings rendered by the learned Principal
District Judge are totally perverse. It is submitted that, the order
passed by the learned Arbitrator rejecting various applications
filed by the respondent No.2 have not been challenged by the
respondent No.2 in her petition filed under Section 34 of the
Arbitration and Conciliation Act, 1996 before the learned Principal
District Judge and thus, the same cannot be challenged for the
first time across the bar in Arbitration Appeal No.3/2015 filed by
her under Section 37.
76. It is submitted by the learned counsel that, the
impugned order passed by the learned Principal District Judge
setting aside the impugned award and thereafter remanding the
matter back to the learned Arbitrator is not only perverse but
Writ Petition No.5528/2010 with
connected matters
totally illegal and contrary to law. In support of the submission
that the learned Principal District Judge could not have remanded
the matter back to the learned Arbitrator, learned counsel for the
Bank placed reliance on the judgment of the Division Bench of
this Court in the case of Geojit Financial Services Limited Vs.
Kritika Nagpal in Appeal No.35/2013 in Arbitration Petition
No.47/2009 and other companion appeals, delivered on
25.6.2013 and unreported order delivered by Division Bench of
this Court, dated 21.9.2013 in the case of Reliance Capital Ltd.
Vs. The Loot (India) Pvt. Ltd. & ors. in APPEAL (L) No.304/2013.
He submits that, the learned Principal District Judge had relied
upon the judgment of the learned Single Judge in case of The
Loot (India) Pvt. Ltd. & ors. Vs. Reliance Capital Ltd., which
judgment was subsequently reversed by the Division Bench of
this Court and it is held that the Court has no power to remand
the proceedings back to the sole Arbitrator.
77. It is submitted by the learned counsel that the
arbitral proceedings as well as the action under the provisions of
Section 13(2) of the SARFAESI Act both could be initiated and
pursued together against the borrowers and guarantors. There
was no bar from proceeding with both the remedies available to
the lenders - Bank.
Writ Petition No.5528/2010 with
connected matters
78. Insofar as the submission of the learned counsel for
the respondent No.2 that various applications were not decided
by the learned Arbitrator is concerned, it is submitted that, all
such applications were totally false and frivolous and were only
made with a view to delay the arbitral proceedings with ulterior
motives. The learned Arbitrator thus rightly rejected all the
applications filed by the respondent No.2. In support of this
submission, the learned counsel invited our attention to various
reasons recorded by the learned Arbitrator rejecting all such
applications filed by the respondent No.2 and also various
reasons recorded in the impugned award about such applications
and the conduct of the respondent No.2 and her husband. He
submits that, since the respondent No.2 did not appear before
the learned Arbitrator, the jurisdiction of the learned Arbitrator
could not be challenged.
79. A perusal of the record clearly indicates that, there
were no disputes that all the parties including the respondent
No.2 herein were served with the summons by the learned
Arbitrator. Various meetings were held by the learned Arbitrator.
The meetings were, however, not attended by the respondent
No.2 and other opponents. Though several applications were
Writ Petition No.5528/2010 with
connected matters
filed by the respondent No.2 with a view to delay the arbitral
proceedings, the respondent No.2, in person or through her
Advocate did not even remain present to argue those
applications. Under Section 16 of the Arbitration and Conciliation
Act, 1996, if the plea of jurisdiction is not accepted by the
learned Arbitrator, such an order can be challenged by the
aggrieved party along with arbitral award under Section 34 of the
Arbitration and Conciliation Act, 1996. The prayers of the
Arbitration Petition filed by the respondent No.2 and others
clearly indicate that the respondent No.2 and others did not
apply for setting aside the order passed by the learned Arbitrator
rejecting all the applications. Though Mr. Thorat, learned counsel
for respondent No.2 made an attempt to show that the ground
were raised by the respondent No.2 in the Arbitration Petition in
respect of the said order passed by the learned Arbitrator
rejecting various applications, the fact remains that, no such
order was challenged by the respondent No.2 in the Arbitration
Petition.
80. A perusal of the said order passed by the learned
Arbitrator indicates that, each and every application made by the
respondent No.2 was totally frivolous and was repeatedly made
on the same ground. This Court has already held in detail in
Writ Petition No.5528/2010 with
connected matters
earlier paragraphs of this judgment that the dispute, if any,
between the member of the Co-operative Society touching the
business of the Society could be raised only under Section 84 of
the Multi-state Co-operative Societies Act. The learned Arbitrator
rightly rejected those applications. The respondent No.2 has not
challenged that order in the Arbitration Petition. Upon
considering the submissions of the learned counsel for 2, at this
stage also we are of the view that various applications filed by
the respondent No.2 for inspection as well as raising issue of
jurisdiction and other issues has been rightly rejected by the
learned Arbitrator. The learned Principal District Judge,
therefore, did not decide this issue in the impugned order. In
our view, there is, thus, no merit in the submission made by the
learned counsel for respondent No.2. Learned counsel for
respondent No.2 could not demonstrate before this Court, the
prejudice alleged to have been caused to the respondent No.2,
guarantor for allegedly not deciding the application filed by the
guarantor.
81. A perusal of the impugned award rendered by the
learned Arbitrator clearly indicates that, the learned Arbitrator
has considered the entire evidence on record produced by the
Bank. Though various opportunities were rendered by the
Writ Petition No.5528/2010 with
connected matters
learned Arbitrator to the respondent No.2 to file written
statement and counter claim, the respondent No.2 chose to
remain absent and did not file written statement and counter
claim. The learned Arbitrator, thus, in these circumstances, was
right in proceeding with the proceedings exparte. In our view,
since the respondent No.2 has chosen to remain absent in spite
of service of the notices and in spite of opportunities granted by
the learned Arbitrator and has not even bothered to file written
statement and counter claim, the learned Arbitrator was right in
proceeding with the proceedings exparte in such circumstances.
In our view, the respondent No.2 thus cannot be allowed to arise
a plea of violation of principles of natural justice. A party who
chooses to remain absent in spite of service of notice and
opportunities granted by the learned Arbitrator cannot allege
violation of principles of natural justice or cannot be allowed to
contend that the learned Arbitrator could not have proceeded
with the proceedings exparte.
82. A perusal of the impugned order passed by the
learned Principal District Judge indicates that the learned
Arbitrator has not dealt with various documents, affidavits filed
by the Bank and totally overlooked the fact that the learned
Arbitrator had rendered various opportunities to file written
Writ Petition No.5528/2010 with
connected matters
statement and counter claim and was kind enough to give
various opportunities to the respondent No.2 to remain present.
Though the respondent No.2 having bent upon to remain absent
before the learned Arbitrator on one or the other ground, the
learned Principal District Judge, has set aside the impugned
award which was passed by the learned Arbitrator correctly and
legally.
83. Insofar as the submission of the learned counsel for
respondent No.2 that the Bank could not have proceeded with
the arbitration proceedings as well as an action under the
Securitisation Act is concerned, the Supreme Court, in the case
of M.D. Frozen Foods Exports Pvt. Ltd. & ors. Vs. Hero Fincorp
Ltd., delivered on 21.9.2017 in Civil Appeal No.15147/2017, has
held that the SARFAESI proceedings are in the nature of
enforcement proceedings while arbitration is an adjudicatory
process. In the event that the secured assets are insufficient to
satisfy the debts, the secured creditors can proceed against other
assets in execution against the debtor after determination of the
pending outstanding amount by a competent forum.
84. Insofar as the part of the order passed by the learned
Principal District Judge, thereby remanding the arbitration
Writ Petition No.5528/2010 with
connected matters
proceedings back before the learned Arbitrator while setting
aside the impugned award is concerned, it is not in dispute that
both the parties are aggrieved by that part of the directions
issued by the learned Principal District Judge. Be that as it may,
the judgment of the learned Single Judge in case of The Loot
(India) Pvt. Ltd. & ors. Vs. Reliance Capital Ltd. relied upon by
the learned Principal District Judge has been reversed by the
Division Bench of this Court by an order and judgment dated
21.9.2013 in case of Reliance Capital Ltd. Vs. The Loot (India)
Pvt. Ltd. & ors. (supra). The Division Bench of this Court, in the
said judgment dated 21.9.2013, had overruled its earlier
judgment dated 25.6.2013 in case of Geojit Financial Services
Limited Vs. Kritika Nagpal & ors. in Appeal No.35/2013 in
Arbitration Petition No.47/2009 and other companion matters,
holding that there was no provision for remand under Section 34
of the Arbitration and Conciliation Act, 1996. In our view, the
said judgment of the Division bench squarely applies to the facts
of this case.
85. The Supreme Court, in Kinnari Mullick & ors. Vs.
Ghanshyam Das Damam [AIR 2017 SC 2785], has held that,
the Court cannot remand the proceedings back to the learned
Arbitrator for deciding the proceedings de novo. The Court can
Writ Petition No.5528/2010 with
connected matters
remand the matter back to the learned Arbitrator under Section
34(4) of the Arbitration and Conciliation Act, 1996 on application
if made by the respondent in the proceedings under Section 34.
It is held that, the limited discretion available to the Court under
Section 34(4) can be exercised only upon written application
made in that behalf by a party to the arbitration proceedings.
The Court cannot exercise this limited power of discretion in the
proceedings before it suo moto. The Supreme Court held that,
no power has been invested by the Parliament in the Court to
remand the matter to the arbitral Tribunal except to adjourn the
proceedings for the limited purpose mentioned in sub-section (4)
of Section 34. The Supreme Court adverted to its earlier
judgment in case of M.C. Dermott International Vs. Burn
Standard Ltd. [ (2006) 11 SCC 181 ].
86. In our view, the learned Principal District Judge thus
had no jurisdiction to remand the matter back to the learned
Arbitrator under any of the provisions of the Arbitration and
Conciliation Act, 1996. Admittedly, there was no application
made by the respondents before the learned Principal District
Judge under Section 34(4). The learned Principal District Judge
has not remanded the matter back for limited purpose for
elimination of grounds of challenge under section 34 of the
Writ Petition No.5528/2010 with
connected matters
Arbitration and Conciliation Act, 1996, and has set aside the
impugned award but has directed the learned Arbitrator to decide
the matter afresh keeping all contentions open. In our view, this
part of the impugned order is totally perverse and contrary to law
laid down by the Supreme Court in case of Geojit Financial
Services Limited (supra), Reliance Capital Ltd. (supra), and
contrary to the judgment of the Supreme Court in case of Kinnari
Mullick & ors. (supra). In our view, the impugned judgment
delivered by the learned Principal District Judge, setting aside the
entire award in the facts and circumstances of this case is also
totally perverse and contrary to the principles laid down by the
Supreme Court. Thus, the entire order deserves to be quashed
and set aside.
87. We, therefore, pass the following order :
1. Writ Petition No.5528/2010 is dismissed. Rule is
discharged.
2. First Appeal No. 2749/2009 is dismissed.
3. Arbitration Appeal No.3/2015 is dismissed.
4. Arbitration Appeal nos.1/2015 and 2/2015 are
allowed. The impugned order dated 25/8/2010,
passed by the learned Principal District Judge,
Writ Petition No.5528/2010 with
connected matters
Aurangabad allowing M.A.R.J.I. No.89/2011 and
M.A.R.J.I. No.90/2011 is set aside. Arbitration
Petition No.89/2011 and Arbitration Petition
No.90/2011 are dismissed. The impugned award
dated 25/8/2010, rendered by the learned Arbitrator
is upheld.
5. Civil Application No.10993/2017 in First Appeal
No.2749/2009 filed for amendment is dismissed.
6. All Civil Applications are disposed of.
7. No order as to costs.
(SUNIL K. KOTWAL) (R.D. DHANUKA)
JUDGE JUDGE
fmp/-
