The provisions of Section 73(1AB) of the Maharashtra Cooperative Societies Act, 1960, which provide that the members of a managing committee who fail to submit the required bonds shall be deemed to have vacated their office, are mandatory and not directory. As a result, any acts done by such members after they have vacated their office are void ab initio.

JUDGMENT :

The judgment has been divided into the following parts:

1. This petition filed under Section 37 of the Arbitration and Conciliation Act, 1996, (for short 'the Act'), challenges an order dated 28 November, 2014 passed by the learned Sole Arbitrator (for short, 'the arbitral tribunal'), whereby an application filed by the respondent-Nutan Kalpana Cooperative Housing Society Ltd., (for short, 'Society'), under Section 16 of the Act, stands allowed, consequence being that the arbitration proceedings as initiated by the petitioner stand terminated/dismissed.

(A) Petitioner’s case

2. The relevant facts are:- The society was contemplating redevelopment of its structures/ chawls sometime in the year 2000. On 30 July, 2000, the society held its 40th Annual General Meeting (for short, 'AGM' ), in which a unanimous resolution was passed to take steps to redevelop/ construct building no. 5 in place of 'A' and 'B' chawls/structures of the society, for which a committee of members of society can be appointed.

3. Sometime in December 2000, the society issued a circular inviting offers for the construction work to be undertaken for such redevelopment. Two offers were received, one from the petitioner and another from a third party, who were shortlisted as potential developers. The petitioner showed its willingness to take up the work of demolition and construction.

4. On 12 August, 2001, the 41st Annual General Body meeting of the society was held, in which the minutes of the previous (40th) meeting were confirmed. The resolution to that effect is stated to have been unanimously passed whereunder the Managing Committee and its office bearers were authorized to finalize the terms and conditions and appoint a developer to whom the construction in relation to such project could be entrusted. The petitioner has stated that the minutes of the said meeting as recorded makes a mention of the fact that the offer made by the petitioner was beneficial, and in the interest of society.

5. On 09 July, 2002, a Memorandum of Understanding (for short, 'MoU'), was executed between the petitioner and the society delineating the broad terms and conditions in relation to the project in question. Thereafter, on 11 August, 2002, the 42nd AGM of the society was held. In such meeting, the minutes of the previous (41st) AGM were unanimously confirmed. In such meeting, members of the “Managing Committee” of the society, were elected in place of the retiring members. The petitioner has stated that in the said meeting the MoU entered between the society and the petitioner was also approved and confirmed by the General Body. It is stated that the minutes of the meeting recorded that the MoU was read out and the terms and conditions were explained to the members. The petitioner has contended that the members present at the General Body Meeting were also informed of the draft Development Agreement and an irrevocable Power of Attorney to be entered between the parties. It is stated that the minutes of the meeting also recorded that the draft of both these documents was read out and explained in vernacular as also in English, and were unanimously approved. It is stated that the office bearers of the Managing Committee were authorized to execute all necessary documents to effectuate the resolutions of the General Body. It is the petitioner’s case that such resolution as passed in the said meeting were not challenged by the Society.

6. The petitioner contends that Section 73(1AB) of the MCS Act was inserted by Maharashtra Act No. 41 of 2000 providing that the members of the Managing Committee would be required to execute bonds in favour of the society to unde