Statutory arbitration under the Multi State Co-operative Societies Act does not require adherence to commercial arbitration provisions, and courts have limited grounds for interfering with arbitral awards.

ORAL ORDER

(PER : HONOURABLE MR. JUSTICE PRANAV TRIVEDI)

1. The present First Appeal is preferred under Section 37 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as 'the Act' for short) assailing the judgment and order dated 10.7.2024 passed by Judge, Court No. 7, City Civil Court, Ahmedabad (hereinafter referred to as 'the learned Court' for short) in Commercial Civil Misc. Application No.175 of 2022.

2. The facts leading to the filing of the present First Appeal are that the appellant No.1 is a registered Partnership Firm whereas appellant Nos. 2 to 4 are the guarantors. It is the case of the appellants that the appellant No.1 Firm had approached the respondent No.1 Bank (hereinafter referred to as 'the respondent' for short) to avail EFC cum FBP/FBD under LC facilities to the tune of Rs.750.00 lakhs. For the same, appellant Nos. 2 to 4 stood as guarantors. The respondent, after duly considering the application made by the appellants, granted the facility on 31.3.2016. The appellants executed the requisite documents for the facility, which was subsequently renewed on 27.2.2017 as well as on 21.3.2018. For the facility availed by the appellants, the stock for export was hypothecated as primary security and two other different properties were mortgaged as collateral security.

3. Pursuant to the facilities availed by the appellants and provided by the respondent, the transaction was carried on smoothly for certain time. However, certain irregularities in payment was done on behalf of the appellants which has culminated into the account of the appellant being classified as a Non-performing Asset on 19.11.2018. Due to non-payment of dues by the appellant as well as classification of the account of the appellant as Non-performing Asset, the respondent issued a legal notice on 29.11.2018, calling upon the appellants to pay the full payment of overdue amount within a stipulated time failing which appropriate legal action would be initiated.

4. Pursuant to the notice, the appellants did not make any repayment and, therefore, the respondent was constrained to appoint Shri V.C. Trivedi as the Sole Arbitrator on 24.12.2018. The appointment of the Arbitrator was done under the provisions of Section 84 of the Multi State Co-operative Societies Act (hereinafter referred to as 'the Multi State Act') as the respondent is a Multi State Cooperative Society. It may be noted that by availing facility, the appellants as well as respondent had agreed for statutory arbitration. Therefore, pursuant to the provisions of Section 84 of the Multi State Act, the appointment of Shri V.C. Trivedi (Retired IAS Officer) cannot be disputed. A notice dated 24.12.2018 was issued by the Sole Arbitrator directing the appellant to appear before him. However, on receipt of the notice of the Arbitration Suit, the appellants appeared before the Sole Arbitrator and represented their case. During the pendency of the proceedings, learned Sole Arbitrator Shri V.C. Trivedi passed away. Therefore, Shri J.H. Champavat, a Judicial officer has been appointed as new Sole Arbitrator. The arbitration proceedings further continued. The appellants took part in the proceedings. After hearing both the parties, learned Sole Arbitrator was pleased to pass an award dated 1.6.2022 accepting the claims of the respondents- original claimants.

5. Being aggrieved and dissatisfied by the award dated 1.6.2022, the appellants preferred Commercial Civil Misc. Application No. 175 of 2022 before the learned Court under Section 34 of the Act. The learned Court after hearing contention raised by both the parties was pleased to dismiss the application preferred by the appellants on 10.7.2024, which is now assailed in the present First Appeal.

6. We have heard Mr. Lalit Patel, learned advocate for the appellants. The learned advocate for the appellants would submit that the appointment of the Sole Arbitrator was an unilateral appointment. The provisions, as envisaged under Section 2