Bombay High Court Reserved Judgment on Challenge to Section 84 of Multi-State Co-operative Societies Act, 2002 and Arbitrator's Appointment. Petitioner Challenged Appointment of Single Arbitrator for All Bank Disputes as Violative of Article 14 of the Constitution and Sought Setting Aside of Arbitral Award.

Constitutional challenge to Section 84 of Multi-State Co-operative Societies Act, 2002 and challenge to arbitrator's appointment and award; connected appeals against trial court order rejecting plaint and against district court order under Section 34 of Arbitration Act.

Petitioner (borrower) seeks declaration that Section 84 is unconstitutional, that arbitrator must be appointed on case-to-case basis, and that the appointment of arbitrator S.M. Nadgauda and the award are void; connected appeals seek setting aside of orders.

The bank invoked Section 84 and appointed an arbitrator; the petitioner claims the provision is arbitrary and the appointment is illegal.

The bank issued SARFAESI notice; petitioner filed earlier WP 3956/2010 challenging notice, and was directed to deposit 50% of outstanding, which was not deposited; the bank then invoked arbitration under Section 84. In connected matters, the Civil Court dismissed the plaint under Order VII Rule 11(d), and the District Court allowed arbitration petition under Section 34, setting aside the award; all these orders are under challenge.

Whether Section 84 of the Multi-State Co-operative Societies Act, 2002 is unconstitutional being arbitrary and violative of Article 14 of the Constitution of India Whether the appointment of a single arbitrator for all existing and future disputes of a co-operative bank is valid under Section 84 Whether the award passed by such arbitrator is null and void for lack of jurisdiction Whether the plaint was rightly rejected under Order VII Rule 11(d) CPC Whether the District Court correctly allowed the petition under Section 34 of Arbitration Act

Petitioner contended that Section 84 is arbitrary and violative of Article 14; that the Central Registrar must appoint arbitrators on a case-to-case basis; that the appointment of S.M. Nadgauda as a common arbitrator for all bank disputes is illegal; and that the award is null and void due to illegal appointment.

The petitioner also seeks a declaration that the Arbitrator is required to be appointed only after dispute is forwarded by the Bank or anyone else before the Central Registrar under Section 84 of the Multi-state Co-operative Societies Act, 2002 and that the Arbitrator shall be appointed in case to case by applying mind and one person cannot be appointed as an Arbitrator for the existing and/or for future disputes. It is the case of the petitioner that, the said Arbitrator Shri S.M. Nadgauda had made an application to the respondent bank for being appointed as an Arbitrator under Section 84 of the Multi-state Act and based on the said application, the Central Registrar has approved his name as an Arbitrator in all the disputes which had already arisen between the respondent bank and its members and also in the disputes which would arise in future.

In 2005, M/s J. Square Steels Pvt. Ltd. availed credit facilities from Abhyudaya Co-operative Bank Ltd. The accounts became non-performing assets on 2008-12-15. The bank issued a notice under Section 13(2) of SARFAESI Act on 2009-06-01. The borrower filed Writ Petition No.3956/2010 challenging that notice; the court directed deposit of 50% of the outstanding amount, which was not deposited. On 2009-08-24, the bank invoked Section 84 of Multi-State Co-operative Societies Act, 2002 and appointed arbitrator S.M. Nadgauda. The arbitrator passed an interim order on 2009-09-07 restraining third party interest. The borrower filed an application on 2009-11-10 questioning jurisdiction, followed by an application under Section 16(2) of Arbitration Act on 2010-01-05. The arbitrator passed an award on 2010-08-25. In connected proceedings, the civil court dismissed the guarantor's plaint on 2009-09-04 under Order VII Rule 11(d) CPC, leading to First Appeal No.2749/2009. The District Court set aside the arbitral award on 2014-11-24 under Section 34 of Arbitration Act, giving rise to Arbitration Appeals No.1, 2 and 3 of 2015. All matters were heard together and judgment was reserved on 2017-09-25 and pronounced on 2017-10-13 (partial text available).

• Multi-State Co-operative Societies Act, 2002: 84
• Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002: 13(2)
• Arbitration and Conciliation Act, 1996: 16(2), 34
• Code of Civil Procedure, 1908: Order VII Rule 11(d)
• Constitution of India: Article 14