Case Note & Summary
The petitioners, including Mrs. Aruna V. Balsekar and others, filed a petition under Section 34 of the Arbitration and Conciliation Act, 1996 challenging an arbitral award dated 11 September 2009. The award was passed by a sole arbitrator under Section 84 of the Multi-State Cooperative Societies Act, 2002 (MSCS Act). The dispute arose from a cash credit and term loan facility granted by Respondent No.1, Shamrao Vithal Cooperative Bank Ltd., to Respondent No.2, M/s B.I. Enterprises, in 1996. The petitioners were guarantors. Petitioner No.1 retired as a partner of the firm on 30 April 1997, and the bank was informed. The bank obtained a Recovery Certificate under Section 101 of the Maharashtra Cooperative Societies Act, 1960 (MCS Act) on 9 March 2000. No further steps were taken until 2002. After the MSCS Act came into force on 3 July 2002, the bank issued a notice under Section 13(2) of the SARFAESI Act in 2007 but did not proceed. In 2008, the bank initiated arbitration proceedings under Section 84 of the MSCS Act, and an arbitrator was appointed. The arbitrator passed the impugned award directing the bank to file execution proceedings before the Assistant Registrar, and if the Assistant Registrar expressed inability to enforce the Recovery Certificate for want of jurisdiction, the Recovery Certificate would be treated as an award passed in arbitration. The petitioners challenged the award on the ground that the arbitrator lacked jurisdiction. The court held that the arbitrator had no jurisdiction to convert a Recovery Certificate obtained under the MCS Act into an arbitral award under the MSCS Act. The proceedings under the MSCS Act could not be used to revive a stale recovery certificate. The award was set aside, and the petition was allowed.
Headnote
A) Arbitration Law - Challenge to Arbitral Award - Section 34 of Arbitration and Conciliation Act, 1996 - Jurisdiction of Arbitrator - The petitioners challenged an award dated 11.09.2009 passed by a sole arbitrator under Section 84 of the Multi-State Cooperative Societies Act, 2002, which directed that a Recovery Certificate obtained under the Maharashtra Cooperative Societies Act, 1960 be treated as an arbitral award if the Assistant Registrar expressed inability to enforce it. The court held that the arbitrator lacked jurisdiction to pass such an award as the Recovery Certificate was not an arbitral award and the proceedings under the MSCS Act could not be used to revive a stale recovery certificate. The award was set aside. (Paras 1-6) B) Cooperative Law - Recovery Certificate - Conversion into Arbitral Award - Section 84 of Multi-State Cooperative Societies Act, 2002 - The Bank obtained a Recovery Certificate under Section 101 of the Maharashtra Cooperative Societies Act, 1960 on 9.3.2000. After the MSCS Act came into force in 2002, the Bank initiated arbitration proceedings under Section 84 in 2008. The arbitrator directed that if the Assistant Registrar could not enforce the Recovery Certificate, it would be treated as an arbitral award. The court found this impermissible as the Recovery Certificate was not an award and the arbitrator had no power to convert it. (Paras 2-5)
Issue of Consideration
Whether the Arbitrator under Section 84 of the Multi-State Cooperative Societies Act, 2002 had jurisdiction to convert a Recovery Certificate obtained under the Maharashtra Cooperative Societies Act, 1960 into an arbitral award, and whether the impugned award is liable to be set aside under Section 34 of the Arbitration and Conciliation Act, 1996.
Final Decision
The court allowed the petition and set aside the arbitral award dated 11 September 2009. The court held that the arbitrator had no jurisdiction to convert the Recovery Certificate into an arbitral award.
Law Points
- Arbitration and Conciliation Act
- 1996
- Section 34
- Multi-State Cooperative Societies Act
- 2002
- Section 84
- Maharashtra Cooperative Societies Act
- 1960
- Section 101
- Jurisdiction
- Recovery Certificate
- Arbitral Award
- Limitation
