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2013 Supreme(Bom) 918
High Court of Judicature at Bombay
ANOOP V. MOHTA, J.
Dr. Dalvi Ali Abdul Quadar
Versus
Kokan Mercantile Co-op. Bank Ltd. & Others
Arbitration Petition No.217 of 2013
Decided on : 03-05-2013
For the Petitioner:Pankaj Kawli i/by Dr. M. Shah Alam Khan, Advocates.
For the Respondents:R1 to R12, Mrs. Alisha Lambay, D.T. Palekar, Shikhir Grover i/by Lambay & Co., Advocates.
The court emphasized the importance of adhering to the provisions of law and principles of natural justice in membership termination cases.
Headnote:
Arbitration - Membership Termination - Arbitration and Conciliation Act, 1996, Multi-State Co-operative Societies Act, 2002 - Section 34 of Arbitration Act, Section 84 of the Multi-State Co-operative Societies Act, 2002 - 30
Fact of the Case:
The respondent-Bank terminated the petitioner's membership and forfeited shares due to a loan settlement. The petitioner raised a dispute, but the arbitrator dismissed the application. The petitioner sought relief under Section 34 of the Arbitration Act.
Finding of the Court:
The court found that the termination of membership and forfeiture of shares by the bank was illegal and contrary to law. The impugned award was quashed, and the petitioner's membership was restored.
Issues: The issues revolved around the legality of the bank's actions in terminating the petitioner's membership and forfeiting shares, as well as the arbitrator's decision.
Ratio Decidendi: The court held that the bank's actions were contrary to the provisions of law and violated principles of natural justice. The arbitrator's decision was found to be unsustainable and based on a policy contrary to the law.
Final Decision: The impugned award was quashed, and the petitioner's membership was restored. The court allowed the petitioner's application and directed the bank to restore the membership and share amount to the petitioner.
1. Rule, returnable forthwith. Heard finally by consent of the parties.
2. The Petitioner has invoked Section 34 of Arbitration and conciliation Act, 1996 (for short “Arbitration Act”) and thereby challenge Award/order dated 22nd January, 2013 passed by the Arbitrator appointed by the Central Registrar, Cooperative Societies under Section 84 of the Multi-State Co-operative Societies Act, 2002 (the Act). The operative part of the above is as under:
“The dispute application is dismissed with arbitration costs payable to the respondents in one set i.e. Rs.40,000/-. The disputant to beat his own.
3. Respondent No.1, a multi-state Co-operative Bank (the Bank) by letter dated 1st October, 2012 terminated the membership of the Bank and communicated to the Petitioner in following words:
“This is to inform you that you were a Director of M/s Ratna Drugs Ltd. and had stood surety for obtaining the loan granted by the Bank to the said company. The said loan was thereafter settled under compromise settlement by waiving off an interest amount of Rs.74.87 lacs.
The Board of Directors of our Bank in their meeting held on 27th September, 2012 has decided to forfeit your shares and adjust the amount against the settlement of loan account of M/s Ratna Drugs Ltd, in the capacity of you being a Director and Surety to the said loan account.
Therefore please note that your Membership No.BR/6893 amounting to Rs.3,125/- has been forfeited and the amount is adjusted against the interest and other charges receivable on account of M/s Ratna Drugs Ltd.”
4. The Petitioner being aggrieved by the same, raised a dispute. The learned Arbitrator, after framing issues by the impugned order, dismissed the dispute application filed by the Petitioner with costs.
5. The Petitioner was admittedly a Member of the respondent-Bank, since 1981 and had been actively participated in the affairs of the Bank. The Petitioner was, at the relevant time, one of the Director of M/s Ratna Drugs Ltd. (the Company) and had stood surety for obtaining the loan from the Bank. There were defaults. It was settled by a compromise by waiving off interest of Rs.74.87 Lacs. The Bank issued no dues certificate dated 15th January, 2009 certifying that Dr. Ali Abdul Quadir (the Petitioner) has no dues payable in personal capacity and also in respect of the Company. By another letter dated 3rd February, 2009, the Bank informed to the Registrar of Companies, Mumbai, that as all dues were recovered, cancel/restore the charge on the Company's factory premises. By another letter dated 4th February, 2009, the Bank certified that “the accounts have been closed on 26th March, 2006 and 22nd January, 2009 respectively and there are no dues pending”. It is also certified that “And Personal Guarantees given by all Directors of M/s Ratna Drugs Ltd. has been released”.
6. The Petitioner, on 1st November, 2012, asked for the details of newly admitted Members of the Bank. He raised various objection to an enhancement of requirement of minimum shares for new membership, from 4 shares to 200 shares. Instead of replying it, the respondent's issued impugned letter dated 1st October, 2012. The legal notice was issued on 15th December, 2012 by the Petitioner to withdraw the action. Ultimately, filed the arbitration case.
7. Before the learned Arbitrator, both the parties filed their reply and made submissions in support of their contentions. There was no denial to the documents, so placed and filed by the parties, including the documents/certificates as referred above. No evidence was lead by the bank and therefore no cross examination also.
8. The learned Arbitrator held that the disputant failed to prove that the decision of the respondents to verify membership and adjust share amount for recovery of loan advanced to the Company is illegal and unwarranted. He further held that the respondents proved that the decision of adjustment of dispute of share was taken as per policy of the Bank and due
