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2026 Supreme(Bom) 171
IN THE HIGH COURT OF JUDICATURE AT BOMBAY NAGPUR BENCH
Pravin S. Patil, J.
Rajlaxmi Multistate Credit Cooperative Society Ltd. – Appellant
Versus
Smt. Ashwini Anand Anchatwar – Respondent
Arbitration Appeal No. 116 of 2025
Decided On : 17-03-2026
Important Points
Subject
Arbitration - Setting Aside Awards
Act Referred
Headnote
(B) Arbitration - Patent illegality and perversity - Award set aside if deals with dispute beyond scope or vitiated by lack of jurisdiction; issue of inherent jurisdiction raisable under Section 34 even if not raised before arbitrator. (Paras 15-16, 20)
Facts of the case:
Multi-state cooperative society referred recovery dispute for loan amount with interest against borrowers and guarantors, claiming them as members. Respondents cited business collapse due to pandemic. Arbitrator awarded amount based on claim affidavit and ledger showing share capital, without further membership proof. Respondents challenged under Section 34 for lack of membership evidence, leading to award quashing; society appealed under Section 37.
Findings of Court:
No documents proved borrowers' membership; arbitrator failed to address vital issue, committing patent illegality; District Judge correctly interfered under Section 34.
Issues: Whether District Judge exceeded scope of Section 34 in setting aside award; whether borrowers admitted as members justifying arbitration under Section 84.
Ratio Decidendi: Arbitrator's assumption of jurisdiction without establishing membership via application and society's decision per Section 25 constitutes patent illegality and dispute beyond submission scope under Section 34(2)(a)(iv); courts may set aside such awards as perverse, lacking evidence on core jurisdictional fact.
Result: Appeal dismissed with no order as to costs.
For the Appellant : Mr. Saurav P Rajurkar
For the Respondent: Mr. R. R. Deo
| Table of Content |
|---|
| 1. appeal under s37 against s34 quashing order. (Para 1 , 2) |
| 2. limited judicial interference with arbitral awards under s34. (Para 3 , 4 , 12 , 17 , 18) |
| 3. s84 loan recovery dispute against borrowers and guarantors. (Para 5 , 6 , 7 , 8 , 9 , 10 , 11) |
| 4. s34 grounds: patent illegality or beyond arbitration scope. (Para 13 , 14 , 15 , 16 , 19 , 20) |
| 5. s84 applies only to multi-state society members. (Para 21 , 22 , 23 , 24) |
| 6. no evidence proves respondents' society membership. (Para 25 , 26 , 27 , 28) |
| 7. membership requires proof beyond ledger entries. (Para 29) |
| 8. guarantor precedent inapplicable; membership proof mandatory. (Para 30) |
| 9. jurisdictional error by arbitrator is patent illegality. (Para 31 , 32 , 33) |
JUDGMENT :
PRAVIN S. PATIL, J.
1. Heard. Rule. Rule made returnable forthwith. By consent of Mr.Saurav P. Rajurkar, counsel for appellant and Mr R.R. Deo, learned counsel for respondent Nos. 1 and 2, the application is taken up for final hearing at the stage of admission.
2. This appeal is filed under Section 37 of the Arbitration and Conciliation Act, 1996, by the Appellant/Multistate Credit Co-operative Society Limited to challenge the judgment and order passed by Principal District Judge, Yavatmal in Civil Misc. Appeal No. 221/2022, whereby the Arbitration Award passed in Arbitration Case No. ARB/RMCCSY/ylmb/911/2021 dated25/06/2022 is quashed and set aside.
3. The submission of the appellant in the present appeal is that the learned District Judge has transgressed the scope of Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred as ‘the Act of 1996’), thereby violating the settled principles of law which stipulate that scope of intervention of the Court in arbitral matters is restricted only to the limited grounds provided under of the Act of 1996.
4. It is further submitted that the case of respondent No.1 and 2 does not fall within any of the grounds provided under Section 34 of the Act of 1996 and, therefore, the indulgence shown by the learned District Judge in the matter is bad in law.
5. In the light of the submissions made by the appellant challenging the judgment of the District Judge, it would be necessary to state certain facts of the present matter to verify whether the case of the respondents falls within the grounds provided under Section 34 of the Act of 1996 or not.
6. In the present case, admittedly, the appellant/society on 27/03/2021 lodged a dispute under Section 84 of the Multi-State Cooperative Societies Act, 2002 (for short ‘the Act of 2002’), read with Section 23 of the Act of 1996, for recovery of an amount of Rs.1,29,34,497/- (Rs. One Crore Twenty Nine Lakh Thirty Four Thousand Four Hundred and Ninety Seven only), along with interest and other charges against the Respondent Nos.1 and 2.
7. The submission of the appellant before the Arbitrator was that present respondent Nos. 1 and 2 are the borrowers, respondent No. 3 and respondent Nos. 4 and 5 are the guarantors of the loan, and they are the members of the Society. It was alleged that after disbursement of loan, respondent Nos. 1 and 2 avoided repayment of the loan as per the installments decided at the time of disbursing the loan. It was further alleged that present respondent Nos. 1, 2, 4 and 5 had availed the membership rights of the society and therefore, the dispute touches the business and management of the society. Hence, as per Section 84 of the Act of 2002, the dispute was referred and the same was tenable under the provisions of law.
8. In response to the lodging of reference to the Arbitrator, notices were issued to the respondent Nos. 1 and 2. The said respondents vide Exhibit Nos. 9 and 10, informed the Arbitrator that because of surge of COVID-19 in the year 2021, their entire business was collapsed and therefore, they are not in a position to repay the loan. Accordingly, requested to grant time for repayment of loan.
9. The said communication of the respondent Nos. 1 and 2 was taken on record by th
