Case Note & Summary
The petitioner, M/s. Kail Limited (formerly Kitchen Appliances India Limited), filed an Arbitration Petition under Section 9 of the Arbitration and Conciliation Act, 1996 seeking interim relief against M/s. Sahebrao Deshmukh Cooperative Bank Ltd. and others. The petitioner had stood as a surety/guarantor for a discounting facility granted by the bank to Respondent No. 2 firm (M/s. Amber Electronics). The bank initiated recovery proceedings under Section 101 of the Maharashtra State Cooperative Societies Act (MCS Act) against the petitioner and the principal debtor, which had attained finality. A pre-attachment notice dated 1 February 2012 was issued by the authority under the MCS Act. On 28 September 2010, the High Court had granted an interim order restraining the bank from disposing of the petitioner's property, but recorded the pendency of the recovery proceedings and granted liberty to the bank to proceed. The respondents raised a preliminary objection that there was no arbitration agreement between the petitioner and the bank, as the tripartite agreement did not contain an arbitration clause. The court examined the agreement and found that the arbitration clause was only between the bank and the principal debtor (Respondent No. 2), and not between the bank and the surety (petitioner). The court held that Section 9 of the Arbitration Act requires the existence of an arbitration agreement between the parties seeking interim relief. Since there was no arbitration agreement between the petitioner and the bank, the petition was not maintainable. The court dismissed the petition, vacated the interim order, and granted the bank liberty to proceed with the recovery under the MCS Act. The court also clarified that the dismissal does not affect the petitioner's right to pursue other remedies available under law.
Headnote
A) Arbitration Law - Interim Measures - Section 9 of the Arbitration and Conciliation Act, 1996 - Maintainability - Petition under Section 9 requires existence of an arbitration agreement between the parties - The petitioner, a surety, sought interim relief against the bank but there was no arbitration clause in the tripartite agreement between the surety and the bank - Held that in the absence of an arbitration agreement, the petition under Section 9 is not maintainable (Paras 5-6). B) Cooperative Societies - Recovery Proceedings - Section 101 of the Maharashtra State Cooperative Societies Act, 1960 - Finality of Proceedings - The bank had initiated recovery proceedings under Section 101 of the MCS Act against the surety and principal debtor, which had attained finality - The court noted that the recovery proceedings were pending and the bank was at liberty to proceed - Held that the existence of a statutory remedy under the MCS Act does not confer jurisdiction under the Arbitration Act (Paras 2-4).
Issue of Consideration
Whether a petition under Section 9 of the Arbitration and Conciliation Act, 1996 is maintainable when there is no arbitration agreement between the petitioner and the respondent bank.
Final Decision
The court dismissed the Arbitration Petition No. 1181 of 2010, holding that it is not maintainable as there is no arbitration agreement between the petitioner and the respondent bank. The interim order dated 28 September 2010 was vacated. The bank was granted liberty to proceed with the recovery under the MCS Act. No order as to costs.
Law Points
- Section 9 of the Arbitration and Conciliation Act
- 1996 requires existence of an arbitration agreement
- Section 101 of the Maharashtra State Cooperative Societies Act provides for recovery
- surety's liability is co-extensive with principal debtor
- no arbitration clause in tripartite agreement between surety and bank
