Case Note & Summary
The petitioner, Rajesh M. Mahtani, was a respondent in arbitration proceedings initiated by the Bombay Mercantile Coop. Bank Ltd. under Section 84 of the Multi State Cooperative Societies Act, 2002 (MSCS Act). The arbitrator was appointed by the Registrar under the MSCS Act. The petitioner participated in the proceedings and then filed an application alleging fraud against the bank and challenging the arbitrator's jurisdiction. The arbitrator, by a reasoned order dated 23 June 2012, rejected the application, observing that the allegations of fraud would be considered at the time of decision on merits and that the issue would be framed and decided along with the main claim. The petitioner then filed a petition under Section 9 of the Arbitration and Conciliation Act, 1996, seeking to challenge the arbitrator's order. The High Court held that the arbitrator had rightly kept the issue of fraud open to be decided on merits, and that mere allegations of fraud without material particulars are not sufficient to oust the arbitrator's jurisdiction. The court noted that the bank is established under the MSCS Act and its records cannot be tested merely by allegations of fraud; the petitioner must prove the allegations by leading evidence. The court found no reason to interfere with the arbitrator's order at that stage and dismissed the petition.
Headnote
A) Arbitration Law - Jurisdiction of Arbitral Tribunal - Allegations of Fraud - Multi State Cooperative Societies Act, 2002, Section 84 - Arbitration and Conciliation Act, 1996, Section 9 - The petitioner, a respondent in arbitration proceedings initiated by the bank under Section 84 of the MSCS Act, alleged fraud and challenged the arbitrator's jurisdiction. The arbitrator rejected the application, keeping the issue open for merits. The High Court held that mere allegations of fraud without material particulars are insufficient to oust the arbitrator's jurisdiction, and the arbitrator's order to decide the issue along with the main petition was proper. The petition under Section 9 was dismissed as there was no reason to interfere at that stage. (Paras 2-4)
Issue of Consideration
Whether the Arbitrator appointed under the Multi State Cooperative Societies Act, 2002 lacks jurisdiction to proceed with arbitration due to allegations of fraud, and whether the High Court can interfere under Section 9 of the Arbitration and Conciliation Act, 1996 with an interim order of the Arbitrator rejecting the challenge to jurisdiction.
Final Decision
The High Court dismissed the Arbitration Petition No. 16 of 2013, holding that there was no reason to interfere with the arbitrator's order at that stage.
Law Points
- Arbitration proceedings under Multi State Cooperative Societies Act
- 2002 are maintainable despite allegations of fraud
- mere allegations of fraud without material particulars do not oust jurisdiction of arbitral tribunal
- Section 9 of Arbitration and Conciliation Act
- 1996 cannot be used to challenge interim orders of arbitrator under MSCS Act
Case Details
2013 LawText (BOM) (06) 57
Arbitration Petition No. 16 of 2013
Mr. Laxman Venkatesan for the Petitioner, Mr. Saleem Valjee for Respondent Nos. 2 and 3
Mr. R.M. Khan, Hon. Arbitrator; The Bombay Mercantile Coop. Bank Ltd.; The Manager, The Bombay Mercantile Coop. Bank Ltd.
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Nature of Litigation
Petition under Section 9 of the Arbitration and Conciliation Act, 1996 challenging an interim order of an arbitrator appointed under the Multi State Cooperative Societies Act, 2002.
Remedy Sought
The petitioner sought to challenge the arbitrator's order rejecting his application alleging fraud and challenging jurisdiction.
Filing Reason
The petitioner alleged fraud and contended that the arbitration proceedings were not maintainable, and challenged the arbitrator's jurisdiction.
Previous Decisions
The arbitrator by order dated 23 June 2012 rejected the petitioner's application, keeping the issue of fraud open to be decided on merits.
Issues
Whether the arbitrator appointed under the MSCS Act has jurisdiction to proceed despite allegations of fraud.
Whether the High Court can interfere under Section 9 of the Arbitration Act with an interim order of the arbitrator rejecting a challenge to jurisdiction.
Submissions/Arguments
Petitioner argued that allegations of fraud oust the jurisdiction of the arbitral tribunal.
Respondent bank contended that the arbitrator rightly kept the issue open for decision on merits.
Ratio Decidendi
Mere allegations of fraud without material particulars are not sufficient to oust the jurisdiction of an arbitral tribunal appointed under the Multi State Cooperative Societies Act, 2002. The arbitrator's decision to decide the issue of fraud along with the main petition on merits is proper, and the High Court will not interfere under Section 9 of the Arbitration and Conciliation Act, 1996 at an interim stage.
Judgment Excerpts
The Petitioner who is Respondent in Arbitration Proceedings initiated by the original Claimants (Respondent Bank) under Section 84 of the Multi State Cooperative Societies Act, 2002 (for short, MSCS Act), has invoked Section 9 of the Arbitration and Conciliation Act, 1996 (for short, the Arbitration Act).
It is therefore, clear that the learned Arbitrator rightly kept the issue of fraud open, to be decided on merits alongwith the main petition.
Even otherwise, mere allegations of fraud and/or misappropriation of amount, as alleged itself are not sufficient.
Procedural History
The bank initiated arbitration proceedings under Section 84 of the MSCS Act. The petitioner participated and then filed an application alleging fraud and challenging jurisdiction. The arbitrator rejected the application on 23 June 2012. The petitioner then filed Arbitration Petition No. 16 of 2013 under Section 9 of the Arbitration Act, which was dismissed by the High Court on 17 June 2013.
Acts & Sections
- Multi State Cooperative Societies Act, 2002: Section 84
- Arbitration and Conciliation Act, 1996: Section 9
