Section 126 of the MCS Act, 1960 and other provisions ought to have been taken note of by the Arbitrator before passing the impugned Award of direction in favour of the Bank to file execution proceedings based upon the Recovery Certificate in question. The Arbitrator further erred in law by holding that the said Recovery Certificate be treated as Award passed in the present proceedings in the event the provisions are not available for execution. The Arbitrator, without jurisdiction, directed that the Bank should be entitled to execute the said Award through proper Civil Court. The remedies, if any, available under the relevant law for execution just cannot be overlooked by the Bank and also the Arbitrator specifically in view of Section 126 of MCS Act as referred above. The Bank, as noted above, in fact invoked various provisions for the recovery of the amount, but failed to take effective steps at the appropriate time within limitation. Therefore, such direction and/or Award to passed by the Arbitrator is totally impermissible, illegal and without jurisdiction. Section 84 of the MSCS Act empowers the Arbitrator to adjudicate the claim and/or disputes, if any, so filed within limitation, but cannot act as an executing Court to execute the Recovery Certificate which was issued in favour of the Bank in the year 2000 by giving direction in the year 2009 by the impugned Award dated 11 September 2009. The learned Arbitrator ought to have dismissed the Petition so filed by the Bank for want of jurisdiction itself. The Award in question, therefore, reflects non-application of mind to the facts as well as the law. It is patently illegal, without jurisdiction, untenable and, therefore, liable to be quashed and set aside.
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Bombay High Court
Mrs. Aruna V. Balsekar & Ors vs 5 Mr.Bhaskaran R. Iyer on 29 March, 2012
Bench: Anoop V.Mohta
The Petitioners have invoked Section 34 of the Arbitration and Conciliation Act, 1996 (for short, the Arbitration Act) and thereby challenged Award dated 11 September, 2009 passed by the sole Arbitrator under Section 84 of the Multi State Cooperative Societies 2 arbp-457-10.sxw Act, 2002 (for short, MSCS Act).
2 Petitioner No.1 was the partner of Respondent No.2/firm along with other partners/Respondents 3 and 4. Petitioner No.2 being husband of Petitioner No.1 and Petitioner No.3 being friend executed Guarantee bound. Respondent No.2 applied for cash credit and term loan facilities with Respondent No.1/Bank some time in the year 1996. The Petitioners along with Respondent No.5 guaranteed the same. On 30.04.1997, Petitioner No.1 retired as a partner and Respondent No.4 joined the firm as a partner. It was accordingly communicated to the Bank and co-lateral security was also replaced.
Respondent No.1/Bank moved an application under Section 101 of the Maharashtra Co-operative Societies Act, 1960 (for short, MCS Act) for recovery of the amount from the firm on 16.03.1999. The Assistant Registrar granted the Recovery Certificate to the Bank on 9.3.2000. No steps were taken till 2002. The Bank issued notice before attachment to the Petitioners and asked for payment within a period of 7 days. No further steps were taken by the Bank.
3 The MSCS Act came into force from 3 July 2002. Respondent No/1/Bank on 13.11.2007 issued notice under Section 13(2) of the 3 arbp-457-10.sxw Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short, SARFAESI Act). The Bank did not take further steps even thereafter.
4 Some time in 2008, the Bank, inspite of Recovery Certificate in their favour initiated proceedings under Section 84 of the MSCS Act.
The Arbitrator was appointed after six years under the said Act.
5 On 11.09.2009, the learned Arbitrator, after hearing both the parties, passed the Award and directed Respondent No/1/Bank to file execution proceedings before the Assistant Registrar, Mumbai and further observed that if the Assistant Registrar, Mumbai expressed his inability to enforce the said Recovery Certificate for want of jurisdiction, the said Recovery Certificate be treated as Award passed in the arbitration proceedings. Therefore, the present Petition is lodged on 10.12.2009 and got it registered in February 2010.
Therefore, the present Petition is by the Petitioners only and not by the firm and other partners.
6 Strikingly, the Recovery Certificate dated 9.3.2000 was already issued in favour of the Bank as they invoked the provisions of the MCS 4 arbp-457-10.sxw Act. Instead of taking steps to recover the amount, they invoked the provisions of SARFAESI Act in the year 2007, though notice before attachment was issued on 5.2.2002 by the Bank itself. There is nothing on record to show why they could not take further steps to recover the amount. Even though MSCS Act 2002 came into force since 2002 they invoked Section 84 some time in 2008. The learned Arbitrator has not dealt with all these objections before passing the order in the following terms :
"The Shamrao Vithal Co.op. Bank Ltd is hereby directed to file before Hon'ble Assistant Registrar Mumbai appropriate execution proceeding in respect Recovery Certificate Nos. i) 963 and ii) 964 a copy each thereof is annexed hereto and which form part of this Award. In case the Hon'ble Asst. Registrar Mumbai for one reason or other expresses his inability to enforce said Recovery Certificate for want of jurisdiction on the ground that in present matter the provisions of MCS Act 1960 are not available to the Bank, alternately it is hereby ordered that in that event the said Recovery Certificates be treated as Award passed in present proceedings. In that event Bank shall be entitle to execute the said award though proper 5 arbp-457-10.sxw Civil Court.
The Bank to bear the Arbitration cost of Rs.10,900/-
inclusive of administrative cost."
7 The Arbitrator, in a typical facts and circumstances, in view of above undisputed position ought not to have passed the above Award as if sitting as an executing Court under the provisions of law. The aspect of delay in filing and/or taking steps based upon the Recovery Certificate issued under the MCS Act by invoked the provisions of Section 84 of the MSCS Act 2002 is totally illegal and impermissible.
The Arbitrator has no jurisdiction to pass such order of execution of the Recovery Certificate of the year 2000. There is no provision under the Act to get the Award executed through the Assistant Registrar, Mumbai being the authority under the MCS Act, 1960.
8 The Arbitrator ought to have dismissed the reference and/or application filed by the Bank based upon the above undisputed position of law on record. There is no justification provided and/or given by the Bank for not taking action though the Competent Authorities, at the relevant time, granted order in their favour.
6 arbp-457-10.sxw
9 The learned Arbitrator further erred in law by overlooking the
contention raised by the Petitioners and others, with regard to the maintainability of such Petition/claim against them, specifically having noted that the provisions of MCS Act, 1960 are not applicable and/or available for the execution of the Award, if any, passed under Section 84 of the MSCS Act, 2002.
Section 126 of the MCS Act, 1960 and other provisions ought to have been taken note of by the Arbitrator before passing the impugned Award of direction in favour of the Bank to file execution proceedings based upon the Recovery Certificate in question. The Arbitrator further erred in law by holding that the said Recovery Certificate be treated as Award passed in the present proceedings in the event the provisions are not available for execution. The Arbitrator, without jurisdiction, directed that the Bank should be entitled to execute the said Award through proper Civil Court. The remedies, if any, available under the relevant law for execution just cannot be overlooked by the Bank and also the Arbitrator specifically in view of Section 126 of MCS Act as referred above. The Bank, as noted above, in fact invoked various provisions for the recovery of the amount, but failed to take effective steps at the appropriate time 7 arbp-457-10.sxw within limitation. Therefore, such direction and/or Award to passed by the Arbitrator is totally impermissible, illegal and without jurisdiction. Section 84 of the MSCS Act empowers the Arbitrator to adjudicate the claim and/or disputes, if any, so filed within limitation, but cannot act as an executing Court to execute the Recovery Certificate which was issued in favour of the Bank in the year 2000 by giving direction in the year 2009 by the impugned Award dated 11 September 2009. The learned Arbitrator ought to have dismissed the Petition so filed by the Bank for want of jurisdiction itself. The Award in question, therefore, reflects non-application of mind to the facts as well as the law. It is patently illegal, without jurisdiction, untenable and, therefore, liable to be quashed and set aside.
11 In the result, the following order :
(i) The Petition is allowed;
(ii)The impugned Award dated 11 September 2009 is quashed and set aside.
(iii)There shall be no order as to costs.
(ANOOP V. MOHTA, J.)
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