The decision clarified that findings on preliminary issues do not bar arbitration claims if they concern different aspects of the dispute under the Co-operative Societies Act.

JUDGMENT

The question to be considered in these two Writ Petitions is whether the Arbitration Court can adjudicate the ARC filed by the 1st respondent when the additional 4th respondent – the Kerala Micro and Small Industries Facilitation Council, (hereinafter referred to as the 'Council'), has rendered an order -Ext.P2, while deciding the quesion of maintainability of the reference filed before it, by the 1st respondent for realising amount due from petitioners.

2. The factual circumstances of the case are as follows:

The 1st respondent herein is a registered partnership firm, engaged in the business of fertilisers. The petitioners Bank used to purchase manure from 1st respondent. Claiming that a sum of Rs.5,52,808/- was due from the petitioners Bank towards the cost of organic manure (compost) supplied, based on purchase orders of Bank, the 1st respondent approached the Council, in a W.P(c) No.14734/12-N & W.P(c) No.15329/12-M 2 reference under Rule 5(iii) of Micro and Small Enterprises Facilitation Council Rules, 2006, numbered as O.A. 6/2009, for recovery of the said amount from the Bank. The petitioners Bank filed an objection raising the question of maintainability. According to the Bank, Mr. Shine Joseph, who is the Sales Officer of the 1st respondent was the person who collected orders and supplied them the required quantity of fertilizer; the petitioners Bank remitted the payment towards the bill amount of each consignment, in the account of 1st respondent with the petitioners Bank and the Sales Officer has withdrawn the same and given them acknowledgement for the same signed on printed vouchers. The 1st respondent had preferred a complaint before the Idukki Police Station against the Bank as well as the Sales Officer Shine Joseph alleging defalcation and cheating. After conducting inquiry the Sub Inspector of Police, Idukki implicated the Sales Officer alone as accused and he informed that the Bank was not involved. Therefore petitioners contended that if the Sales Officer has defalcated any amount collected from the Bank, it is an issue between the Sales Officer and the 1st respondent and therefore the complaint will not lie against the Bank. After hearing the parties on the question of maintainability, the W.P(c) No.14734/12-N & W.P(c) No.15329/12-M 3 Council found that it can be safely presumed that the representative Shine Joseph had accepted the money from the petitioners Bank. The Council therefore held that Sri.Shine Joseph, the representative manager of the 1st respondent alone is responsible for defalcation and cheating and hence the petition is not maintainable before the Council. It further found that the issue of cheating committed by the representative of the complainant can be agitated before the appropriate legal forum as the Council does not have any authority to adjudicate the same.

3. Thereafter the 1st respondent filed ARC.1250 of 2010 before the Assistant Registrar of Co-operative Societies, praying for an award directing the petitioners Bank to pay to the 1st respondent a sum of Rs.5,52,808/- as damages towards actual financial loss and Rs.50,000/- as special damages along with interest @ 12% per annum from 12.11.2009. In the Arbitration Case, the plaintiff/1st respondent, claimed damages for the irregular payment effected by the Bank to Sri.Shine Joseph from the account of 1st respondent without their consent, alleging deficiency in service also. The 1st respondent alleged that their partners alone were authorised to operate the said Bank account W.P(c) No.14734/12-N & W.P(c) No.15329/12-M 4 in the name of 1st respondent. It was alleged that the bank had not intimated them the number of the account they opened in its name and its outstanding balance at any time. It was stated that in case the amounts were credited in their account in the name of Sri.Shine Joseph, such entries were unauthorised and not binding on them. In case it was credited in the name of the 1st respondent, its partners alone we