Case Note & Summary
The petitioner, Bank of Baroda, challenged an arbitral award passed by the Banking Ombudsman (respondent no.2) in favor of respondent no.1, Vijaya Bank. The dispute arose from counterfeit drafts issued by M/s U.A.E. Exchange Centre (UEC) under an agency agreement with Vijaya Bank, which were paid by Bank of Baroda between 29 June 1995 and 5 July 1995, totaling Rs.1,75,000. Upon discovering the drafts were counterfeit, Bank of Baroda demanded refund by letter dated 21 July 1995, which Vijaya Bank opposed. By consent, the matter was referred to arbitration under Clause 21(2) of the Banking Ombudsman Scheme, 2002. The arbitrator awarded Rs.1,75,000 with interest at the Repo rate from the dates of payment. Bank of Baroda challenged the award primarily on the ground of limitation, arguing that the claim was barred by the three-year limitation period under the Limitation Act, 1963. The court rejected this contention, holding that the Banking Ombudsman Scheme, 2002, is a special mechanism for dispute resolution and the Limitation Act does not apply to such proceedings. The court upheld the award, dismissing the petition.
Headnote
A) Arbitration - Banking Ombudsman Scheme - Limitation - Clause 21(2) of Banking Ombudsman Scheme, 2002 - The court considered whether an award passed by the Banking Ombudsman for a claim arising from counterfeit drafts paid in 1995 was barred by limitation. The court held that the limitation period under the Limitation Act, 1963, does not apply to proceedings under the Banking Ombudsman Scheme, 2002, as it is a special scheme for resolution of disputes. (Paras 1-3)
Issue of Consideration
Whether the arbitral award passed under the Banking Ombudsman Scheme, 2002, based on a transaction from 1995, is barred by limitation.
Final Decision
The court dismissed the petition, upholding the arbitral award. The court held that the Limitation Act, 1963, does not apply to proceedings under the Banking Ombudsman Scheme, 2002, as it is a special scheme for dispute resolution.
Law Points
- Limitation Act
- 1963
- Section 3
- Banking Ombudsman Scheme
- 2002
- Clause 21(2)
- Arbitral Award
- Counterfeit Drafts
- Agency Agreement
Case Details
2012 LawText (BOM) (02) 80
Arbitration Petition No.115 of 2010
Mr. K. Shroff a/w Mr. Jayesh Desai a/w Ms. Hema Desai with Mr. N.H. Munjjee i/b Singh & Co. for the petitioner; Mr. Santosh Shetty for respondent no.1.
Vijaya Bank, Mr. N. Sadasivan (Ombudsman under the Banking Ombudsman Scheme 2002)
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Nature of Litigation
Challenge to an arbitral award passed by the Banking Ombudsman under the Banking Ombudsman Scheme, 2002.
Remedy Sought
The petitioner (Bank of Baroda) sought to set aside the award directing it to pay Rs.1,75,000 with interest to respondent no.1 (Vijaya Bank).
Filing Reason
The petitioner contended that the claim was barred by limitation as the transaction occurred in 1995 and the demand was raised in 1995, but the arbitration was initiated much later.
Previous Decisions
The Banking Ombudsman passed an award on an unspecified date, directing payment of Rs.1,75,000 with interest.
Issues
Whether the arbitral award under the Banking Ombudsman Scheme, 2002, is barred by limitation under the Limitation Act, 1963.
Submissions/Arguments
The petitioner argued that the claim was barred by limitation as the transaction occurred in 1995 and the demand was raised in 1995, and the arbitration was initiated beyond the three-year limitation period.
Ratio Decidendi
The Limitation Act, 1963, does not apply to proceedings under the Banking Ombudsman Scheme, 2002, as it is a special mechanism for resolution of disputes between banks and their customers.
Judgment Excerpts
The petitioner-bank has challenged the award passed by the Arbitrator (Office of Banking Ombudsman, Maharashtra and Goa) as the matter was referred by consent of the parties to settle the dispute with respondent-Bank of Baroda.
Learned counsel appearing for the Petitioner basically contended that the award so passed based upon the transaction of 1995 is beyond period of limitation of three years which is available normally in such type of transactions.
Procedural History
The dispute arose in 1995 when Bank of Baroda paid counterfeit drafts presented by Vijaya Bank. Demand for refund was made on 21 July 1995. By consent, the matter was referred to arbitration under Clause 21(2) of the Banking Ombudsman Scheme, 2002. The arbitrator passed an award in favor of Vijaya Bank. Bank of Baroda filed Arbitration Petition No.115 of 2010 in the Bombay High Court to challenge the award.
Acts & Sections
- Banking Ombudsman Scheme, 2002: Clause 21(2)
- Limitation Act, 1963: Section 3
