SANJEEV KUMAR Vs. BHARAT CO-OP BANK

JUDGEMENT

(1.) By the two applications filed under Sec. 11(5) read with Sec. 14 and 15 of the Arbitration and Conciliation Act, 1996, the two applicants, who are the opponents before the Arbitral Tribunal, which was constituted to adjudicate the claim filed by the respondent Bharat Co-operative Bank Ltd, Bombay, seek the following reliefs :-

(2.) The applicants proceed to narrate in the two distinct applications, that on receipt of the communication from the Sole Arbitrator, dtd. 25/11/2021, the applicants were informed about initiation of arbitration by the respondent Bank, pursuant to which the Arbitrator had entered upon a reference and the arbitration proceedings were scheduled on 21/12/2021. Along with the said notice, the applicants received a Statement of Claim, which was staked before the Arbitrator Mr.Vasant Narayanrao Lothey (Patil), Ex-Presiding Officer, Judge DRT-3, Mumbai appointed by Registrar of Co-operative Societies, Maharashtra, Pune u/s.84 of the Multi State Co-operative Societies Act, 2002 (for short 'MSCS Act'). The claim staked by the respondent Bank in the two distinct disputes was projected on the basis that the Bank is a Multi-state Co-operative Society, which is engaged in banking business in State of Maharashtra, Karnataka and Gujarat and the opponents being the members of claimant's Bank, availed the financial facility, the opponent no.1 as the principal borrower and opponent no.2 as Joint/co-borrower. Since the loan was availed for the purpose of business expansion, it was disbursed under the distinct Asset Backed loan account, which resulted in execution of two distinct loan agreements on 22/6/2016 along with the Covering cum Undertaking from Authority cum Standing Instruction Letter. The claimant specifically pleaded that the opponents executed the Demand Promissory Note and the letter of General Lien and Set-off along with the Loan Agreement which furnished a security for due repayment of the loan along with interest, costs, charges, expenses, penal interest etc. to the Claimant/Bank. Apart from this, an Indemnity bond cum Affidavit cum Undertaking was also executed by creating a registered mortgaged on the property belonging to the opponents. Since the opponents were irregular in paying the monthly instalments and/or clearing the outstanding loan amount and neglected and avoided to regularize the outstanding loan, in respect of the loan facility, they rendered themselves liable for future consequences. This resulted in the Claimant recalling the entire loan facility through the legal notice issued to the opponents and this covered an amount of the loan along with interest, penal interest, costs, charge, expenses etc. Apart from this, it is also the claim of the Bank that they have initiated proceedings under the Securitization And Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and the District Magistrate has passed an order for taking physical possession of the mortgaged premises. Since the arbitration was invoked and according to the applicants, they were not intimated about invocation of arbitration, the applicants have questioned the commencement of arbitration proceedings, which according to them, can only be commenced, after a notice is issued u/s.21 of the Arbitration and Conciliation Act.

(3.) The applicants, on receipt of the claim of the Bank, realised that the Arbitrator has been appointed u/s.84(4) of the Multi-State Co-operative Societies Act, 2002 by the Commissioner for Co-operation and Registrar of Co-operative Societies, Pune, by his order dtd. 6/10/2021. The order of appointment of the Arbitrator is placed on record along with the application. On perusal of the appointment order, the applicants have questioned the appointment, since according to them, it is evident from the letter of appointment, that the Arbitrator is appointed to adjudicate the disputes pending before him and he is also appointed as Arbitrator in 13 other proposals, which take the number of references made over to him to '19' (Nineteen), all in connection with the respondent - Bharat Co-operative Bank (Bombay) Ltd. It is in this background the applicants claim that the number of arbitrations assigned to the Arbitrator would give rise to a justifiable ground as to his independence or to his impartiality and by placing reliance upon clause 22 of the Vth Schedule of the 1996 Act, an apprehension is raised by the applicants that the Arbitrator cannot adjudicate the disputes referred to him in an impartial manner and the object of the Amendment Act 3 of 2016, inserting the safeguards to ensure independence of the Arbitrator, is being frustrated.