The main legal point established in the judgment is that the jurisdiction of an arbitrator under section 84 of the Multi State Cooperative Societies Act is limited to disputes involving members of the cooperative society, and non-members cannot be subjected to arbitration under this provision.

1. Heard.

2. A short but interesting question that arises for consideration is:

Whether an arbitrator appointed under section 84 of the Multi State Cooperative Societies Act has jurisdiction to entertain a claim and/or pass an award against an acceptor of a bill of exchange who is not its member merely on the ground that the drawer of the bill is its member?

3. The facts of the case in a narrow compass may be briefly stated thus:­

The petitioner is a nationalised bank and the respondent no.1 is a Multi-State Cooperative

Bank. Mr. Dinesh Rupasri, the respondent no.2 herein is a member of the respondent no.1. He was sanctioned bill discounting facility by the respondent no.1. The respondent no.2 allegedly sold certain goods to the respondent no.3 who is a constituent of the petitioner bank. The respondent no.2 drew bills of exchange/hundies in three sets between 6th October 2000 and 2nd February 2001 for the price of the goods sold by him to the respondent no.3. The bills were accepted by the respondent no.3 and coaccepted by the petitioner as a banker of the respondent no.3. On the due dates, the bills were dishonoured by nonpayment. According to the petitioner, the bills were fraudulent and the respondents in collusion with an officer of the petitioner bank were attempting to defraud it and therefore it was not liable to honour the bills. Criminal proceedings are stated to have been initiated against the respondents nos.2 and 3 and officers of the petitioner bank in that regard. In the meanwhile, the respondent no.1 requested the Central Registrar to appoint an arbitrator and refer for his decision its claim arising out of dishonour of the bills. The Central Registrar accordingly referred the dispute for arbitration under section 84 of the MultiState Cooperative Societies Act, 2002 (for short "the Act"). The learned arbitrator, after considering the oral and documentary evidence adduced before it, held that the respondent nos.2, the drawer of the bill as the respondent no.3, and the petitioner bank were jointly and severally liable to pay to the respondent no.1 bank the amount of the bills of exchange together with interest due thereon. That award is impugned in this petition.

4. Learned counsel for the petitioner bank submitted that the respondent no.3 and the petitioner, who had coaccepted the bills of exchange, were not the members of the respondent no.1 cooperative bank and therefore the Central Registrar could not have referred the dispute between the respondent no.1 cooperative bank on one hand and the respondent no.3 and the petitioner on the other hand to arbitration under the Act. The arbitrator had no jurisdiction to arbitrate upon the dispute and pass an award under section 84 of Act.

5. Per contra, learned counsel for the respondent no.1 submitted that the dispute was covered by clause (b) of subsection (1) of section 84 of the Act and, therefore, the Central Registrar was right in referring the dispute to arbitration; the arbitrator had the jurisdiction to entertain and try the dispute. He submitted that under clause (b) of subsection (1) of section 84 of the Act, a dispute between a multistate cooperative society on the one hand and its member or even a person claiming through or under a member could be referred to arbitration. Since the respondent nos.3 and the petitioner were claiming under the respondent no.2, who was the principal debtor, the dispute between the respondent no.1 cooperative bank on the one hand and the respondent no.3 and the petitioner on the other hand would be referred to arbitration under the Act.

6. In order to appreciate the contention of the parties, it would be useful to refer to subsection (1) of section 84 of the Act which reads as under:­"

84. Reference of disputes.­

(1) Notwithstanding anything contained in any other law for the time being in force, if any dispute other than a dispute regarding disciplinary action taken by a multistate cooperative society against its past employe