[Cites 23, Cited by 0]
Bombay High Court
Shree Shantinath Steels vs The Board Of Directors Of Abhyudaya Co Op ... on 12 February, 2026
2026:BHC-OS:4094
carbp-742-2025-group.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
Digitally signed ORDINARY ORIGINAL CIVIL JURISDICTION
by SHAGUFTA
QUTBUDDIN IN ITS COMMERCIAL DIVISION
SHAGUFTA PATHAN
QUTBUDDIN Date:
PATHAN 2026.02.12
17:43:38 COMMERCIAL ARBITRATION PETITION NO. 742 of 2025
+0530
WITH
INTERIM APPLICATION (LODGING) NO.1785 OF 2026
IN
COMMERCIAL ARBITRATION PETITION NO. 742 of 2025
A. Navinchandra Steel Private Limited,
Having registered office at 704,
Ecstasy Commercial Building, City of Joy, ...Petitioner/
Nirmal Lifestyle, Jata Shankar Dosa Marg,
Applicant
Mulund (W), Mumbai - 400 080
Versus
1. Board of Directors of the Abhyudaya Co-Op.
Bank Limited,
Having its administrative office at:
K.K. Tower, Abhyudaya Bank Lane,
Off. G.D. Ambedkar Marg,
Parel Village, Mumbai - 400 012
2. The Authorized Officer,
Abhyudaya Co-op. Bank Ltd.,
Having its administrative office at:
K.K. Tower, Abhyudaya Bank Lane,
Off. G.D. Ambedkar Marg,
Parel Village, Mumbai - 400 012
3. Shri V.N. Lothey (Patil)
Arbitrator, Appointed u/s 84 of
Multi-State Co-op Societies Act, 2002,
NM Joshi Marg, Mahalaxmi, ...Respondents
Mumbai 400 011
WITH
COMMERCIAL ARBITRATION PETITION NO 200 OF 2025
WITH
INTERIM APPLICATION NO.478 OF 2026
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IN
COMMERCIAL ARBITRATION PETITION NO 200 OF 2025
1. Shree Shantinath Steels
706, Ecstasy Commercial Bldg, City of Joy,
Nirmal Life Style Ltd.,
Jata Shankar Dosa Marg,
...Petitioner
Mulund (West), Mumbai - 400080
2. Nilaben Rajesh Soni
Proprietor of Shree Shantinath Steels
706, Ecstasy Commercial Bldg, City of Joy,
Nirmal Life Style Ltd.,
Jata Shankar Dosa Marg,
Mulund (West), Mumbai-400080.
Versus
1. Board of Directors of the
Abhyudaya Co-Op. Bank Limited,
Having its administrative office at:
K.K. Tower, Abhyudaya Bank Lane,
Off. G.D. Ambedkar Marg,
Parel Village, Mumbai - 400 012
2. The Authorized Officer,
Abhyudaya Co-op. Bank Ltd.,
Having its administrative office at:
K.K. Tower, Abhyudaya Bank Lane,
Off. G.D. Ambedkar Marg,
Parel Village, Mumbai - 400 012
3. V.N. Lothey (Patil)
Arbitrator, Appointed u/s 84 of
Multi-State Co-op Societies Act, 2002,
NM Joshi Marg, Mahalaxmi, ...Respondents
Mumbai 400 011
WITH
INTERIM APPLICATION NO.7412 OF 2025
IN
COMMERCIAL ARBITRATION PETITION NO 200 OF 2025
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1. Nilaben Rajesh Soni
Proprietor of M/s. Shree Shantinath Steels
706, Ecstasy Commercial Bldg, City of Joy,
Nirmal Life Style Ltd.,
...Petitioner
Jata Shankar Dosa Marg,
Mulund (West), Mumbai-400080.
Versus
1. The Board of Directors of
Abhyudaya Co-op. Bank Limited,
Having its administrative office at:
K.K. Tower, Abhyudaya Bank Lane,
Off. G.D. Ambedkar Marg,
Parel Village, Mumbai - 400 012
2. The Authorized Officer,
Abhyudaya Co-op. Bank Ltd.,
Having its administrative office at:
K.K. Tower, Abhyudaya Bank Lane,
Off. G.D. Ambedkar Marg,
Parel Village, Mumbai - 400 012
3. V.N. Lothey (Patil)
Arbitrator, Appointed u/s 84 of
Multi-State Co-op Societies Act, 2002,
NM Joshi Marg, Mahalaxmi, ...Respondents
Mumbai 400 011
------------
Mr. Mathews Nedumpara a/w. Ms. Hemali Kurne and Mr. Dayanand, for
the Petitioner.
Mr. Madhur Rai a/w. Sanjiv P., Mr. Durgesh Telang and Mr. Yogesh Mishra
i/b. PRS Legal, for Respondent Nos. 1 and 2.
------------
CORAM : SHARMILA U. DESHMUKH, J.
RESERVED : JANUARY 29, 2026
PRONOUNCED : FEBRUARY 12, 2026
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JUDGMENT:
1. Both the Petitions filed under Section 34 of the Arbitration and
Conciliation Act, 1996 (for short, "the Arbitration Act") challenges the
Award passed by the learned Arbitrator appointed under Section 84 of
the Multi-State Co-operative Societies Act, 2002 (for short, "the MSCS
Act"). Commercial Arbitration Petition No 200 of 2025 challenges the
Award dated 3rd July, 2023 passed in Arbitration Case No
ARB/ACB/VNL/2063 of 2021 and Commercial Arbitration Petition No
742 of 2025 challenges the Award dated 5th December, 2022 passed in
Arbitration Case No ARB/ACB/VNL/2055 of 2021. Common submissions
were canvassed and both the Petitions are being disposed of by this
common judgment.
2. Considering that submissions canvassed were confined to legal
submissions and did not assail the findings of fact and rightly so in view
of the restrictive scope of Section 34 of Arbitration and Conciliation
Act, 1996, this Court has not referred to the facts of the case. Suffice
for our purpose is to state that by reason of default in repayment of
financial assistance availed by the Petitioners, the Respondent Bank
had invoked the provisions of Section 84 of Multi- State Co-operative
Societies Act, 2002 and referred the Dispute to the arbitration of
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Learned Arbitrator leading to passing of the impugned Awards. In
addition, the Respondent bank also invoked the provisions of The
Securitisation and Reconstruction of Financial Assets and Enforcement
of Security Interest Act, 2002 (for short, "Sarfaesi Act") for
enforcement of security of mortgaged property.
3. The findings of the learned Arbitrator can be broadly
summarized as under :-
(i) There is no dispute about availing of financial facilities and default
occurred in payment of outstanding dues.
(ii) The Petitioner is a member of the bank and therefore the dispute
under Section 84 of the MSCS Act is maintainable before the Tribunal.
(iii) The provision of sub Section 3 of Section 84 of MSCS Act empowers
the arbitral tribunal to decide whether any particular dispute is
entertainable before the Tribunal and for appointment of Tribunal no
consent of the parties is required as the same is statutory arbitration.
(iv) The MSCS Act prevails over the Sarfaesi Act and if the opponents
are aggrieved against the measures adopted by the bank under
Section 13 of the Sarfaesi Act, the provision of Section 17 of the
Sarfaesi Act provides the remedy.
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4. Mr. Nedumpara, learned counsel for the Petitioner would assail
the jurisdiction of the Arbitrator to decide the Dispute under Section
84 of the MSCS Act in view of the provisions of The Recovery of Debts
and Bankruptcy Act, 1993 (for short, "RDB Act") and Sarfaesi Act.
According to him, it is the central legislation which will govern the
proceedings for recovery of debts as banking is relatable to Entry 45 of
List I of Seventh Schedule of Constitution of India. He points out to the
stated object of the MSCS Act to contend that the object is the
governance of co-operative societies and to consolidate and amend the
law relating thereto. He submits that in contradistinction the
provisions of the Sarfaesi Act and the RDB Act have been enacted with
the stated object of adjudication and recovery of debts due to banks
and financial institutions and matters connected thereto. To buttress
the submission that recourse can be taken only to the provisions of
RDB Act for recovery of dues by banks and financial institutions, he
points out the provisions of Section 17 and Section 19 of the RDB Act.
Drawing support from the said provisions, he contends that the proper
procedure has been provided under the RDB Act and the dispute in the
present case is in the realm of recovery of money, MSCS Act has no
application.
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5. He submits that recovery of debt is permitted under the Sarfaesi
Act, and the RDB Act and it is desirable that the recovery procedure be
initiated in one forum. He submits that the Respondent Bank has
invoked multiple jurisdiction as it has approached the Arbitrator under
Section 84 of MSCS Act, filed application under Sarfaesi Act and has
also invoked Insolvency and Bankruptcy Code for declaring insolvency
of the Petitioners. He submits that under the Micro, Small and Medium
Enterprises Development Act, 2006 (for short, "MSME Act"), a
mechanism is provided for resolution of distressed industries and the
notification dated 29th May, 2015 provides for revival and rehabilitation
by formation of committee.
6. He would further submit that the MSCS Act has been enacted by
the Parliament in exercise of powers under Article 252 of the
Constitution of India and has acted as a delegatee of State Legislature.
He submits that the subject of banking is relatable to Entry 45 of List I
and co-operative societies is relatable to Entry 32 of List II of Seventh
Schedule of Constitution of India. He submits that the Respondent
Bank being co-operative bank, its banking activity is governed by law
enacted under Entry 45 of List I i.e RDB Act and Sarfaesi Act
considering the doctrine of pith and substance and to other operations
apart from banking activities, laws enacted by the State Legislature will
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apply. He submits that therefore it is the RDB Act which will apply and
not MSCS Act.
7. He would assail the Learned Arbitrator's finding on its
jurisdiction and would submit that the Arbitrator being appointed
under the statute could not decide a challenge to its own jurisdiction.
In support, he relies upon the decision in the case of Vidya Drolia and
Ors. Durga Trading Corporation1.
8. Per contra, Mr. Rai, learned counsel for the Respondents would
submit that under the provisions of section 84(2) of the MSCS Act, the
dispute can be referred to arbitration as it is a dispute touching the
business of the Society i.e. the recovery of loan. He would further point
out that the learned Arbitrator has considered the arguments of the
Petitioner that the Arbitrator cannot decide the challenge to its own
jurisdiction and has held that the appointment of Arbitrator is under
Section 84 by the Central Registrar which does not contemplate any
consent of the parties. He would further submit that the objection that
the Arbitrator cannot rule on its own jurisdiction has been rejected.
He would further point out that the learned Arbitrator has held that
once the party has obtained loan and has become member of the bank,
1 (2019) 20 SCC 406
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both the parties are bound by the provisions of MSCS Act being a
special Act.
9. He would further submit that in the action taken under Section
13 of the Sarfaesi Act, is for the purpose of securitisation of the
financial assets and enforcement of security interest and not for
recovery of debt. He submits that in view of Section 84 of MSCS Act, it
is not necessary to approach the Tribunal under the RDB Act. He would
submit that Section 37 of the Sarfaesi Act provides that the provisions
of Sarfaesi Act are in addition to the other laws.
10. Rival contentions now fall for determination:
11. The Respondent Bank is a Multi-State Co-operative Society
registered under the provisions of MSCS Act and carries on business of
banking. The MSCS Act is a self contained legislation providing the
mechanism for redressal of disputes under Section 84 of MSCS Act.
RDB Act facilitates the recovery of dues by banks and financial
institutions under the aegis of Tribunal established under the Statute
without being burdened by the technicalities of Civil Procedure Code.
Sarfaesi Act enables the banks, financial institutions and other secured
creditors to recover their dues without intervention of Courts or
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Tribunals. The contention of Mr. Nedumpara is that the mechanism of
arbitration contained in MSCS Act gets excluded when the multi State
co-operative banks seeks to recover the dues in which case the
exclusive jurisdiction lies with the Tribunal under the RDB Act or
Sarfeasi Act which are central legislations. The issue as to whether
co-operative banks which are co-operative societies also are governed
by Schedule VII List I Entry 45 or List II Entry 32 of Constitution of India
and to what extent came up for consideration before the Constitution
Bench of Hon'ble Apex Court in Pandurang Ganpati Chaugule vs
Vishwasrao Patil Murgud Sahakari Bank Ltd2. The moot question was
the applicability of Sarfaesi Act to co-operative banks. The Hon'ble
Apex Court affirmed that Sarfaesi Act will also apply to co-operative
banks and Parliament was competent to amend Section 2(c) of Sarfaesi
Act by adding sub-clause (iva) a multi State Co-operative bank. The
Hon'ble Apex Court examined the scope of legislative field covered by
Entry 45 of List I i.e Banking and Entry 32 of List II of Seventh Schedule
of Constitution of India to hold that multi state level co-operative
societies registered under MSCS Act with respect to banking are
governed by legislation related to Entry 45 of List I of Seventh
Schedule of Constitution of India. It held that recovery of debt would
be an essential function of banking institution and Parliament can
2 (2020) 9 SCC 215
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enact law under List I Entry 45 and it is open for Parliament to provide
remedy under Section 13 of Sarfaesi Act. Co-operative bank's entire
operation and act of banking are governed by law enacted under List I
Entry 45 i.e. Banking Regulation Act, 1949 and Reserve Bank of India
Act under Entry 38 of List I. It held that no conflict has been created by
providing additional procedure under Section 13 of Sarfaesi Act and it
is open for bank to adopt procedure which it may choose.
12. The Hon'ble Apex Court thus upheld the legislative competence
of the Parliament to provide the additional procedure for recovery
under Section 13 of Sarfaesi Act and held that the provisions of Section
2(1)(c)(iva) adding multi state co-operative bank is not ultra vires. Even
if it is held that recovery of debts is banking activity and Parliament has
the legislative competence to enact law and has enacted the law, the
question is whether the provisions of MSCS Act are excluded for
seeking recovery of debts and exclusive jurisdiction is under RDB Act.
The answer to this question can be found in the RDB Act itself. The
statutory provision of RDB Act does not place an absolute embargo on
the mechanism provided under the MSCS Act and on the contrary,
admits of the right of a multi State co-operative society to initiate
proceedings under MSCS Act to recover debts. By amendment Act 1 of
2013, the RDB Act came to be amended and sub section (1A) and (1B)
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came to be introduced in Section 19 of RDB Act, which governs the
procedure for recovery of debt by a bank or financial institution by
approaching the Tribunal established under the RDB Act. Sub sections
(1A) and (1B) of Section 19 reads as under:
"(1A) Every bank, being multi State co-operative bank referred to in sub
clause (vi) of clause (d) of Section 2, may at its option, opt to initiate
proceedings under the Multi State Co-operative Societies Act, 2002(39 of
2002) to recover debts, whether due before or after the date of
commencement of the Enforcement of the Security Interest and Recovery
of Debts Laws (Amendment) Act, 2012 from any person instead of making
an application under this Chapter.
1B. In case, a bank being, multi State co-operative bank referred to in sub-
clause (vi) of clause (d) of Section 2 has filed an application under this
Chapter and subsequently opts to withdraw the application for the
purpose of initiating proceeding under the Multi-State Co-operative
Societies Act, 2002(39 of 2002) to recover debts, it may do so with the
permission of the Tribunal and every such application seeking permission
from the Tribunal to withdraw the application made under sub-section (1A)
shall be dealt with by it as expeditiously as possible and disposed of within
thirty days from the date of such application.
Provided that in case the Tribunal refuses to grant permission for
withdrawal of the application filed under this sub-section, it shall pass such
orders after recording the reasons therefor."
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13. The amendment gives an option to multi-State co-operative
bank defined in Section 2(vi)(d) of RDB Act to initiate the proceeding
under MSCS Act instead of approaching the Tribunal for recovery of its
debts. Even accepting that the business of banking is covered by
legislations relatable to Entry 45 of List I of Seventh Schedule to the
Constitution of India, the central legislation i.e. RDB Act itself permits
the Respondent No 1 Bank to choose the mechanism of recovery
provided under the MSCS Act. It is only where the application is first
filed before the Tribunal under RDB Act and thereafter the bank seeks
to exercise the option to initiate proceedings under MSCS Act, that the
Tribunal is required to consider whether permission should be granted
or not. In the present case, the Respondent Bank has chosen to initiate
proceedings under the MSCS Act, instead of approaching the Tribunal,
which cannot be said to be without jurisdiction. As the option is made
available by the statute itself, it cannot be accepted that the exclusive
jurisdiction vested in the Tribunal constituted under the RDB Act and
Arbitrator had no jurisdiction under Section 84 of MSCS Act.
14. It is also pertinent to note that Section 84 of the MSCS Act is
prefaced with non obstante clause which provides that notwithstanding
anything contained in any other law for the time being in force, if any
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dispute touching the constitution, management, or business of a multi-
state co-operative society arises among the classes set out in clause (a)
to (d) of sub Section (1) of Section 84, the same shall be referred to
arbitration. The non obstante clause gives overriding effect if there is
anything inconsistent with any other law. Sub clause (a) of sub Section
(2) of Section 84 provides that a claim by the multi-state co-operative
society for any debt or demand due to it from a member is deemed to
be a dispute touching the constitution, management or business of the
multi-state co-operative society. Though initially it was sought to be
contended by Mr. Nedumpura, that the Petitioner is not a member of
the Society, upon instruction, he would fairly concede that, the
Petitioner is a member of the Respondent Bank. In any event there is
finding of fact by the Learned Arbitrator that the Respondent Bank has
placed on record the documents of membership application form
signed by the Petitioners. The Respondent being a society carrying on
business of banking, the advancing or recovery of debt due to it
constitutes business of the society and claim of multi state co-
operative society for any debt or demand due to it from its member is
squarely covered by Section 84 of MSCS Act. There is no provision of
MSME Act pointed out which mandates the applicability of MSME Act
before adopting remedy under Section 84 of MSCS Act.
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15. Section 84(5) of MSCS Act makes applicable to the provisions of
Arbitration and Conciliation Act, 1996 to arbitration under Section 84
of MSCS Act unless provided otherwise. Section 16 of the Arbitration
and Conciliation Act, 1996 Act provides that the arbitral tribunal is
competent to rule on its jurisdiction and accordingly the Arbitrator in
the present case has upheld its jurisdiction to decide the Dispute. I
am therefore not inclined to accept the submission that the learned
Arbitrator could not have ruled upon its own jurisdiction.
16. Dealing next with the objection that having invoked Section 13
of Sarfaesi Act for recovery of its dues, it was not open for Respondent
bank to initiate proceedings under MSCS Act, the position is settled
that Section 37 of Sarfaesi Act does not bar the application of other
laws. Section 35 of Sarfaesi Act provides for over-riding effect of
Sarfaesi, which will apply only in event conflict is demonstrated. In
present case, no conflict is demonstrated between MSCS Act and
Sarfaesi Act. in Indiabulls Housing Finance Limited vs Deccan
Chronicle Holdings Limited & Ors. 3, one of the issues before the
Hon'ble Apex Court was whether the provisions of Sarfaesi Act can be
invoked by the amalgamated company when the original lender does
not fall within the purview of Sarfaesi Act but the amalgamated
3 (2018) 14 SCC 783
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company does and whether the invocation of arbitration proceedings
bars the initiation of proceedings under Sarfaesi Act. The Hon'ble Apex
Court on the aspect of simultaneous application of the Arbitration Act
and Sarfaesi Act held that Sarfaesi Act is a special enactment which
provides speedy remedy to the banks and financial institution and
merely because steps are taken under the Arbitration Act which is
statute of general nature would not mean that remedy under the
special statute is foreclosed. It noted the decision in Transcore vs
Union of India & Anr.4, which had rejected the applicability of doctrine
of election and held that the financial institution is not precluded form
taking steps under Sarfaesi Act simply because it has availed remedy
under RDB Act. It noted that Sarfaesi Act was enacted to regulate
securitisation and reconstruction of financial assets and enforcement
of security interest and matters connected therein. Liquidation of
secured interest through a more expeditious procedure is what has
been envisaged. Sarfaesi proceedings are in the nature of enforcement
proceedings while arbitration is an adjudicatory process. In M.D Frozen
Foods Exports Pvt Ltd & Ord vs Hero Fincorp Ltd. 5 it was held that
Sarfaesi and arbitration proceedings can go hand in hand and one
remedy does not bar the other. The judicial pronouncements re-
inforces and reiterates the complementary existence of Sarfaesi with
4 (2008) 1 SCC 125
5 (2017) 16 SCC 741
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other enactment pertaining to recovery of debts due to banks and
financial institutions.
17. The enforcement of security interest by invoking the provisions
of Sarfaesi Act cannot be pressed into service to oust the jurisdiction of
Arbitrator under Section 84 of MSCS Act, which is an adjudicatory
process. The impetus is to provide speedy and expeditious procedure
for recovery of debts and there is no prohibition demonstrated from
the MSCS Act or Sarfaesi Act against initiation of proceedings under
one enactment upon proceedings being initiated under the other
enactment. There is no relevance shown of the decision of Vidya
Drolia & Ors (supra) concerning the issue of certain disputes being non
arbitrable in context of present proceedings.
18. In light of the above discussion, there is no warrant for
interference with the Awards dated 5th December, 2022 and 3rd July,
2023. Resultantly the Petitions fail and stands dismissed.
19. Interim Applications do not survive for consideration and stands
dismissed.
[SHARMILA U. DESHMUKH, J.]
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