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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
BHARGAV D. KARIA, J.
MEHSANA URBAN COOPERATIVE BANK LIMITED & others - Appellant
Versus
UNION OF INDIA & others - Respondent
SPECIAL CIVIL APPLICATION NO. 7344 of 2021
Decided On : 21-09-2021
Multi-State Cooperative Society’s Act, 2002 - Section 78, 84, 45(6) - Constitution of India, 1950 - Article 226 and 227 - Arbitration and Conciliation Act, 1996 - Industrial Disputes Act, 1947 - Section 2 (k) - Bank - Appointment Of An Arbitrator - Whether appointment of Chief Executive Officer (CEO), Shri Vinodbhai Patel after superannuation is in violation of rules as laid down in bye-laws of bank - Whether any loans have been extended which are violative of provisions of section 29 and 43 of MSCS Act, 2002 or any of provision of MSCS Rules 2002 & guidelines of RBI - Whether directors who have been re-elected in board including Chairman of bark mentioned in RBI's report were eligible to contest in election held - Whether election process was in consonance with provisions of MSCS Act, 2002 - Whether a dispute referred to arbitration under this section is or is not a dispute touching constitution, management or business of a multi-state cooperative society, decision thereon of arbitrator shall be final and shall not be called in question in any court - Whether any proceedings should have been initiated by respondent No.2 under Section 78 of Act, 2002 in facts of case - Whether respondent No.2 could have invoked provisions of Section 84 during inquiry proceedings under Section 78 of Act, 2002 by appointing respondent No.5 as an Arbitrator or not - Whether respondent No.2 could have initiated proceedings under Section 78 of Act, 2002 or not.
Finding of the Court:
In facts of case, neither of four conditions is fulfilled as no request is received either from Federal Cooperative Societies to which petitioner No.1-Society is affiliated or a Creditor or not less than one third of members of Board or not less than one fifth of total number of members of petitioner No.1-Society - In such circumstances, respondent No.2 could not have initiated proceedings under Section 78 of Act, 2002 only on receipt of a letter from Reserve Bank of India as well as complaints received from respondent Nos.3 and 4 under Section 78 of Act, 2002 - Even disputes which are considered to be deemed disputes are also specified in Sub-section (2) thereof - It is true that Central Registrar, Cooperative Societies can exercise power of appointment of an Arbitrator though such powers can be delegated as per notification but at same time when Registrar, Cooperative Societies of State has already appointed an Arbitrator for three years then matter for settlement of disputes can be referred to Arbitrator already appointed pursuant to exercise of delegated power by Registrar, Cooperative Societies of State and in that view of matter also by impugned order, respondent No.5 could not have been appointed as an Arbitrator while exercising powers under Section 84 of Act, 2002 - Learned advocate Mr.Pandya submits that respondent Nos.3 and 4 may not be precluded from filing further complaints or respondent No.2 may not be precluded from initiating further proceedings in accordance with law if required in future - It is needless to say that respondent No.2 is empowered to initiate any proceedings in accordance with law and any observation made in this order cannot restrain or preclude respondent No.2 from exercising his statutory powers in accordance with law.
Result: Petition allowed
JUDGMENT :
Heard learned Senior Advocate Mr.Prakash Jani assisted by learned advocate Mr.Shivang Jani for the petitioners, learned Additional Solicitor General Mr.Devang Vyas for the respondent Nos.1 and 2 and learned advocate Mr.Tirthraj Pandya for the respondent No.3.
1. Rule, returnable forthwith. Learned Additional Solicitor General Mr.Devang Vyas waives service of notice of rule for the respondent Nos.1 and 2 and learned advocate Mr.Tirthraj Pandya waives service of notice of rule for the respondent No.3.
2. Respondent Nos.4 and 5, though served, have chosen not to appear pursuant to the notice issued by this Court and that respondent No.4 is similarly situated person to that of respondent No.3 for which learned advocate Mr.Pandya appears and respondent No.5 is an Arbitrator appointed by the respondent No.2 and as such, they are formal parties and no notice of Rule is required to be served upon them.
3. Having regard to the controversy in narrow compass, with the consent of the learned advocates for the respective parties, the matter is taken up for hearing today.
4.1. At the outset, learned advocate Mr.Pandya raised preliminary objections which he has raised at the time of issuance of notice by this Court on 20th May, 2021 with regard to the maintainability of the petition filed by the petitioner No.1-Bank through its Chairman and by petitioner No.2 who is a Chief Executive Officer against whom the inquiry was initiated by the respondent No.2 under Section 78 of the Multi-State Cooperative Society’s Act, 2002 (for short ‘the Act, 2002’).
4.2. It was submitted by learned advocate Mr.Pandya that as per the letter dated 6th December, 2018 issued by the Reserve Bank of India, list of the related accounts in the petitioner-Bank was forwarded to the respondent No.2- Central Registrar, Co-Operative Societies wherein, it was pointed out that the petitioner-Bank has extended the credit to the Chairman/Directors and/or their relatives as per the said list. It was also submitted that the Reserve Bank of India has imposed penalty upon the Bank for extending the credit to its Chairman/Directors and/or other relatives including the Chief Executive Officer. It was therefore submitted that petition cannot be filed by the Bank through such persons challenging the impugned order dated 28th April, 2021 passed by the respondent No.2 appointing the Arbitrator under Section 84 of the Act, 2002 while conducting inquiry under Section 78 of the Act, 2002 for the resolution of the disputes stated in paragraph No.10 of the impugned order.
4.3. It was further submitted that the petitioner-Bank cannot challenge such order by way of a petition under Article 226 and/or Article 227 of the Constitution of India on the ground that the petitioner-Bank is represented by the Chairman and the Chief Executive Officer against whom the inquiry was contemplated by the respondent No.2 and therefore, such order could not have been challenged at the cost of the Bank. It was submitted that the petition is liable to be dismissed on this ground only.
5.1. In the reply, learned Senior Advocate Mr.Prakash Jani submitted that the impugned order passed by the respondent No.2 is contrary to the provisions of the Act, 2002 and as such, the same is challenged by the petitioner-Bank in view of the facts and circumstances which are narrated in the memo of the petition in detail and further pointed out that the respondent No.2-Central Registrar, Cooperative Societies could not have appointed an Arbitrator under Section 84 of the Act, 2002 by conducting the proceedings under Section 78 of the Act, 2002 and therefore, the petitioner-Bank has rightly challenged such order by filing this petition as such illegal order cannot be sustained in the eye of law.
5.2. It was further submitted that the petitioner No.1- Bank and the petitioner No.2-Chief Executive Officer are authorized to file this petition as per the authority given by the Board of the Directors of the petitioner No.1-Bank.
6. By t
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