Multi-state co-operative banks have statutory option under RDB Act to use MSCS Act arbitration for debt recovery from members; SARFAESI enforcement proceedings do not oust it; arbitrator competent to rule on own jurisdiction.

JUDGMENT :

SHARMILA U.DESHMUKH, J.

1. Both the Petitions filed under Section 34 of the ARBITRATION AND CONCILIATION ACT , 1996 (for short, “the Arbitration Act”) challenges the Award passed by the learned Arbitrator appointed under Section 84 of the Multi-State Co-operative Societies Act, 2002 (for short, “the MSCS Act”). Commercial Arbitration Petition No 200 of 2025 challenges the Award dated 3^rd July, 2023 passed in Arbitration Case No ARB/ACB/VNL/2063 of 2021 and Commercial Arbitration Petition No 742 of 2025 challenges the Award dated 5^th December, 2022 passed in Arbitration Case No ARB/ACB/VNL/2055 of 2021. Common submissions were canvassed and both the Petitions are being disposed of by this common judgment.

2. Considering that submissions canvassed were confined to legal submissions and did not assail the findings of fact and rightly so in view of the restrictive scope of Section 34 of ARBITRATION AND CONCILIATION ACT , 1996, this Court has not referred to the facts of the case. Suffice for our purpose is to state that by reason of default in repayment of financial assistance availed by the Petitioners, the Respondent Bank had invoked the provisions of Section 84 of Multi- State Co-operative Societies Act, 2002 and referred the Dispute to the arbitration of Learned Arbitrator leading to passing of the impugned Awards. In addition, the Respondent bank also invoked the provisions of The SECURITISATION AND RECONSTRUCTION OF FINANCIAL ASSETS AND ENFORCEMENT OF SECURITY INTEREST ACT , 2002 (for short, “Sarfaesi Act”) for enforcement of security of mortgaged property.

3. The findings of the learned Arbitrator can be broadly summarized as under :-

(i) There is no dispute about availing of financial facilities and default occurred in payment of outstanding dues.

(ii) The Petitioner is a member of the bank and therefore the dispute under Section 84 of the MSCS Act is maintainable before the Tribunal.

(iii) The provision of sub Section 3 of Section 84 of MSCS Act empowers the arbitral tribunal to decide whether any particular dispute is entertainable before the Tribunal and for appointment of Tribunal no consent of the parties is required as the same is statutory arbitration.

(iv) The MSCS Act prevails over the Sarfaesi Act and if the opponents are aggrieved against the measures adopted by the bank under Section 13 of the Sarfaesi Act, the provision of Section 17 of the Sarfaesi Act provides the remedy.

4. Mr. Nedumpara, learned counsel for the Petitioner would assail the jurisdiction of the Arbitrator to decide the Dispute under Section 84 of the MSCS Act in view of the provisions of The Recovery of Debts and Bankruptcy Act, 1993 (for short, “RDB Act”) and Sarfaesi Act. According to him, it is the central legislation which will govern the proceedings for recovery of debts as banking is relatable to Entry 45 of List I of Seventh Schedule of Constitution of India. He points out to the stated object of the MSCS Act to contend that the object is the governance of co-operative societies and to consolidate and amend the law relating thereto. He submits that in contradistinction the provisions of the Sarfaesi Act and the RDB Act have been enacted with the stated object of adjudication and recovery of debts due to banks and financial institutions and matters connected thereto. To buttress the submission that recourse can be taken only to the provisions of RDB Act for recovery of dues by banks and financial institutions, he points out the provisions of Section 17 an