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1973 Supreme(P&H) 25
PUNJAB & HARYANA HIGH COURT
P.C.Pandit and Bhopinder Singh Dhillon JJ.
Sunder Singh And Ors.
Versus
Central Co-operative Bank Ltd.And Anr.
Execution First Appeal No. 154 of 1966,
Decided On : JANUARY 25, 1973
An award made by an Arbitrator under the Punjab Co-operative Societies Act, 1961, is valid and binding on the parties, even if the sureties were not made parties to the arbitration proceedings.
Headnote:
CO-OPERATIVE SOCIETY - AWARD - EXECUTION - JURISDICTION - ARBITRATION - DISPUTE - MORTGAGE - SURETIES - LIABILITY - CIVIL COURT - JURISDICTION - AWARD - VALIDITY - NATURAL JUSTICE - VOIDABLE ORDER - NULLITY.
Fact of the Case:
A Co-operative Society took a loan from a Bank and mortgaged its property and that of its members as sureties. A dispute arose between the Society and the Bank, which was referred to arbitration under the Punjab Co-operative Societies Act, 1961. The Arbitrator awarded the Bank a certain amount, which the Society failed to pay. The Bank filed an application for execution of the award against the Society and the sureties. The sureties objected to the execution on the ground that they had ceased to be members of the Society before the award was made and that they were not made parties to the arbitration proceedings.
Finding of the Court:
The Court held that the dispute between the Society and the Bank was one and indivisible and could not be split up. The Arbitrator had jurisdiction to decide the dispute and the award was valid. The sureties' objections were not raised in time and they were barred by Section 82 of the Act, which barred the jurisdiction of Civil Courts to question any order, decision or award made under the Act.
Issues: 1. Whether the dispute between the Society and the Bank could be referred to arbitration? 2. Whether the sureties were liable for the debt of the Society? 3. Whether the award was valid? 4. Whether the sureties' objections to the execution of the award were maintainable?
Ratio Decidendi: 1. The dispute between the Society and the Bank was one and indivisible and could not be split up. The Arbitrator had jurisdiction to decide the dispute and the award was valid. 2. The sureties were liable for the debt of the Society as they had mortgaged their property as security for the loan. 3. The award was valid as the sureties' objections were not raised in time and they were barred by Section 82 of the Act, which barred the jurisdiction of Civil Courts to question any order, decision or award made under the Act.
Final Decision: The appeal was dismissed and the parties were left to bear their own costs.
Prem Chand Pandit, J.
1. On the request of Ladwa Hira Goods Transport Co-operative Society, Ladwa, District, Karnal, hereinafter referred to as the Society, the Central Co-operative Bank, Karnal, hereinafter called the Bank, agreed to advance a loan up to the limit of Rs. 30,000/- to the Society on the condition that it should execute a hypothecation deed together with a surety bond in favour of the Bank and thereby mortgage the movable and immovable property of the sureties and also of the Society. The Society desired to have a loan of Rs. 27,000/- for the time being, out of which Rs. 5,000/- had already been taken by it and the remaining amount of Rupees 22,000/= was to be received later on. It was said that the balance of Rs. 3,000/- would be got from the Bank when required. In order to get this loan, the society executed a registered hypothecation deed, dated 18th April 1956, through its President Piara Singh. In the said document, Piara Singh as well as two other sureties, who were also the members of the Society, mortgaged without possession their properties specified in the deed, which was also signed by them. With regard to the property of the Society, which had to be hypothecated, it was stated that--
"all the trucks etc. purchased with the aforesaid amount of loan and other complete trucks or other property of the Society, which it purchased, shall remain n hypothecated with the aforesaid Bank and the trucks so purchased shall be got comprehensively insured and insurance rights of the Society shall also remain hypothecated with the Bank."
It was also mentioned in the deed that the executants thereof jointly and severally declared that if the Society, which was the principal debtor, did not pay the amount, as per regulations of the Bank and the terms of the hypothecation deed, and also the damages and costs as stated in Clause 4 of the deed or avoided its payment, the Bank would be entitled to recover the said amount with interest, costs and damages stated in the clause from the persons and also the hypothecated and unhypothecated, movable and immovable properties of the executants Nos. 1 to 6, the sureties, "Without taking any steps for its recovery from the Society, the principal debtor.
2. After the taking of the loan on the basis of the hypothecation deed, it appears that some payments towards the loan were made by the Society to the Bank, but later on nothing else was received from the Society. A dispute, therefore, arose between the Society and the Bank and it was referred for determination to an arbitrator by the Registrar of the Co-operative Societies vide his order dated 25th October, 1960, obviously under section 55 of the Punjab Co-operative Societies Act, 1961 , hereinafter called the Act. On 22nd December, 1961, the Arbitrator gave the following award:-
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"Whereas the following matter in dispute between the Karnal Central Co-Operative Bank Ltd. Karnal, and the Ladwa Hira Goods transport Society Ltd., has been referred to me for determination by the Registrars order dated 25-10-1960, I having duly considered the matter hereby direct that the said the Ladwa Hira Goods Transport Society Ltd. do pay to the said the Karnal Central Co-operative Bank Ltd., Karnal, the sum of Rs. 14736.87 principal with Rs. 929.57 interest up to 30.06.1961 and costs Rs. 1566.56 or Rs. 17230.00 in all, together with interest at the rate of 6 per cent. per annum until the realization of the principal sum, viz. Rs. 15199.00.
The above amount shall be paid by the said the Ladwa Hira Goods Transport Society Ltd. If not paid, the amount may be realised through a Civil Court either by the sale of the property of the Society which was specifically mortgaged for the satisfaction of this debt and which is shown in detail in the schedule attached to this award, or of any other property belonging to the Society or its members or by arrest of the members of the Society. Award given in the presence of the Bank representative, Manager o
