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2015 DIGILAW 158 (ORI)

Food Corporation of India Workers' Cooperative Credit Society Ltd. v. Union of India

2015-03-03

BISWANATH RATH

body2015
JUDGMENT : Biswanath Rath, J. 1. This is a Writ Petition seeking quashing of the communication under Annexures-7 & 10 by declaring the same as illegal, arbitrary without jurisdiction & mala fide & further restraining the Opp. Party No. 3 from acting as Arbitrator pursuant to Annexures-7 & 10 pending disposal of the Writ Petition. The short back ground of the case is that the Petitioner is a society registered under the Multi State Co-operative Societies Act, 1984 (for short 'the Act 1984') with an objective of economic & social betterment of its members through mutual aid in accordance with the Cooperative principles & also with an objective to encourage thrift self help & co-operation amongst the members & to borrow funds from members or others to be utilized for loans to its members for useful purposes. The society came into existence in 1993 & is governed by its Bye-law. The Act 1984 was repealed by "Act, 2002". The Act 2002 provides for its own machinery registering Multi States Societies & also regulating the rights of its members. It is averred that in the matter of election of the society, appointed returning officer issued notice on 20.04.2011 to all its members numbering more than 21000 scattered throughout the country intimating therein the election program. In response to the said notice, the complainant-Opp. Party No. 4 by telegram dated 7.5.2011 requested the Society to send him a nomination paper & copy of the voter list. Subsequently, the Opp. Party No. 4 was directed to deposit certain amount towards cost of the same. The election to the post of delegates &the Directors, as scheduled, was held on 14.05.2011 with participation of members all over the country. The result was also declared at the very same day. While the matter stood thus, the Petitioner's society received a letter from the Opp. Party No. 2 wherein it has been Indicated that on a complaint being lodged by Opp. Party No. 4, the Opp. Party No. 2 appointed Opp. Party No. 3 as Arbitrator to arbitrate the complaint of the Opp. Party No. 4 under the provisions of the Arbitration & Conciliation Act, 1996 (for short 'the Act 1996') in exercise of power under Section 84 of the Act, 2002. Party No. 4, the Opp. Party No. 2 appointed Opp. Party No. 3 as Arbitrator to arbitrate the complaint of the Opp. Party No. 4 under the provisions of the Arbitration & Conciliation Act, 1996 (for short 'the Act 1996') in exercise of power under Section 84 of the Act, 2002. The Petitioner alleged that even though it was served with such a notice but at no point of time it had any information as to existence of any complaint. Therefore, the Petitioner claimed that the appointment of the Arbitrator being done without any notice or any opportunity of hearing, there is ill exercise of power by the competent authority. It is further alleged that along with the communication dated 7.5.2011, the Petitioner was also not being provided with any copy of the complaint, which made the Petitioner to right back that it is not in a position to respond in absence of supply of the copy of the complaint. While complaining in the manner, indicated hereinabove, the Petitioner also raised an objection on the communication under Annexure-7, as it was without holding any enquiry as required under Section 78 of the Act, 2002 in as much as the appointment of an outsider as an arbitrator could not have been done. Further by the time, the letter under Annexure-7 was issued, the complaint under Annexure-9 had ceased. The Petitioner further alleged that from the document filed under Annexure-8, it has come to know that the complaint has been lodged by Opp. Party No. 4 on 06.05.2011 questioning the proposed election which was scheduled to be held on 14.05.2011 & in absence of any prohibitory order, the election has already been held in the meanwhile on the premises that the Opp. Party No. 4 accepted the election process yielded to the result. It is claimed by the Petitioner that the complaint in its present form is not maintainable as the challenge therein has become infructuous in the meanwhile. Referring to Section 84 of the Act, 2002, Petitioner contended that by this provision the Central Registrar is empowered to appoint an arbitrator for adjudication of a dispute contemplated under the said Act & Sub-Section 5 thereof provides that such arbitration will be in consonance with the "1996 Act". Similarly, the power of appointment of arbitrator has been conferred on Hon'ble Chief Justice of the High Court. Similarly, the power of appointment of arbitrator has been conferred on Hon'ble Chief Justice of the High Court. The Petitioner claimed that notwithstanding such provision empowering the highest judicial authority of the State, appointment of Arbitrator can never be made without being satisfy the genuineness & giving an opportunity to the other side. The Petitioner, therefore, claimed that the appointment of Arbitrator is not in terms of the provision contained in Section 78of the Act, 2002 & the appointment of Arbitrator is done behind the back of the Petitioner. The Petitioner further alleged that this is an action in connivance in between Opp. Party No. 2 & Opp. Party No. 3 in order to put the society into financial losses. Further, since the Opp. Party No. 4 asked for nomination paper & list of valid voters for acting on the same, he is precluded from pursuing the complaint & estopped from proceeding any further. The Petitioner further claimed that after realizing their mistake in the notice under Annexure-7, the Opp. Party has deliberately issued a corrigendum on 07.07.2011 which was received on 12.07.2011 replacing the complaint referred to therein. Therefore, the corrigendum made by the previous impugned actions is void in law at this stage. For the first time, it was revealed that there is allegedly another dispute petition dated 29.05.2011 which has never seen the light of day. It is thus alleged that resultantly the communication under Annexure-7 was not based on so called disputes on 9.05.2011 & it was 00 the basis of the complaint dated 06.05.2011 which had no existence at the time of appointment of Arbitrator. Under these premises, the Petitioner sought for quashing of the impugned order as well as action therein. 2. Per contra, the Opp. Party No. 4 submitted that the Petitioner misled the provision of law referred to therein. The Writ Petition is filed in suppression of material fact & as such liable to be dismissed. It is contended by Opp. Party No. 4 that he has applied for settlement of dispute by way of arbitration, u/s. 84 of the Multi State Co-operative Society Act, 2002 against the Petitioner, before the Central Registrar of Cooperative Societies, Ministry of Agriculture & Cooperation Department of Corporation on 06.05.2012. It is contended by Opp. Party No. 4 that he has applied for settlement of dispute by way of arbitration, u/s. 84 of the Multi State Co-operative Society Act, 2002 against the Petitioner, before the Central Registrar of Cooperative Societies, Ministry of Agriculture & Cooperation Department of Corporation on 06.05.2012. Being dissatisfied with the election process & the procedure adopted by the Returning Officer appointed by the Petitioner & worked contrary to the provisions of Multi State Co-operative Society Act, 2002 as well as contrary to the provisions contained in Bye-laws of the Petitioner's society & with absence of principle of natural justice & equity. The complaint of the Petitioner was returned on the plea that the election dispute to be preferred within 30 days of the declaration of the result in terms of provisions contained in Section 85(1)(c) of the MSCS Act, 2002. The Opp. Party No. 4 claimed that the Order Dated 26.05.2011 of the Central Registrar of Co-operative Societies was bad in law not only being opposed to the provision contained in the Act referred but also opposed to a decision of the Rajasthan High Court. Even though it was aggrieved by the said action but instead of challenging the same by way of writ, filed a fresh complaint on 29.5.2011 challenging the election in the society within 30 days as required under law under Section 84 of the MSCS Act, 2002. The Opp. Party No. 4 next contended that the Central Registrar has passed a right order on the complaint of the Opp. Party No. 4 in the matter of appointment of Arbitrator in exercise of power conferred on him u/ss. 84 & 85 of the MSCS Act, 2002. In the premises, the Opp. Party No. 4 contended that there is no illegality committed by the authority in the matter of passing the impugned orders vide Annexures-7 & 10. 3. Similarly, on their appearance the Opp. Party Nos. 1 & 2 filed a counter affidavit parallel to the objection raised by Opp. Party No. 4 & thereby justified the impugned orders & claimed that the impugned orders do not suffer from any illegality. 4. The Petitioner filed rejoinder affidavit as against the counter filed by the Opp. Party Nos. 1, 2 & 4 denying the allegations made against it in both the counter affidavits at the instance of the Opp. Party Nos. Party No. 4 & thereby justified the impugned orders & claimed that the impugned orders do not suffer from any illegality. 4. The Petitioner filed rejoinder affidavit as against the counter filed by the Opp. Party Nos. 1, 2 & 4 denying the allegations made against it in both the counter affidavits at the instance of the Opp. Party Nos. 1 & 2 as well as the Opp. Party No. 4 & claimed that the impugned orders are passed on consideration of complaint of Opp. Party No. 4 dated 06.05.2011 & there is no consideration of complaint dated 29.05.2011, as alleged. The question as arises for determination of the case of the parties in the present Writ Petition are: "(a) Whether the impugned order vide Annexures-7 & 10 are upon consideration of the complaint dated 06.05.2011 or 29.05.2011 made by the Petitioner? (b) Whether an opportunity of hearing was necessary before the order of appointing arbitrator was passed in the matter?" 5. Before attaining to answer the above questions, it is apt to take note of the provisions contained in Sections 78 & 84 of the Act, 2002 which are quoted as herein below: "78. Inquiry by Central Registrar: (1) The Central Registrar may, on a request from a federal cooperative to which a multi-state cooperative society is affiliated or a creditor or not less than one-third of the members of the board or not less than one-fifth of the total number of members of a multi-state cooperative society hold an inquiry or direct some person authorised by him by order in writing in this behalf to hold an inquiry into the constitution, working & financial condition of a multi-state cooperative society: Provided that no inquiry under this sub-Section shall be held unless a notice of not less than fifteen days has been given to the multi-state cooperative society. (2) The Central Registrar or the person authorised by him under Sub-section (1) shall have the following powers, namely- (a) he shall at all reasonable times have free access to the books, accounts, documents, securities, cash & other properties belonging to or in the custody of the multi-state cooperative society & may summon any person in possession or responsible for the custody of any such books, accounts documents, securities, cash or other properties to produce the same, at any place specified by him; (b) he may, notwithstanding any bye-law specifying the period of notice for a general meeting of the multi-state cooperative society, require the officers of the society to call a general meeting of the society by giving notice of not less than seven days at such time & place at the headquarters of the society to consider such matters, as may be directed by him; & where the officers of the society refuse or fail to call such a meeting, he shall have power to call it himself; (c) he may summon any person who is reasonably believed by him to have any knowledge of the affairs of the multi-state cooperative society to appear before him at any place at the headquarters of the society or any branch thereof & may examine such person on oath. (3) Any meeting called under clause (b) of Sub-section (2) shall have all the powers of a general meeting of the society called under the bye-laws of the society & its proceedings shall be regulated by such bye-laws, (4) The Central Registrar shall, within a period of three months of the date of receipt of the report, communicate the report of inquiry to the multi-state cooperative society, the financial Institutions if any to which the society is affiliated. & to the person or authority, If any, at whose instance the inquiry is made. "84. & to the person or authority, If any, at whose instance the inquiry is made. "84. Reference of disputes: (1) Notwithstanding anything contained in any other law for the time being in force, if any dispute [other than a dispute regarding disciplinary action taken by a multi-state cooperative society against its paid employee or an industrial dispute as defined in clause (k) of Section 2 of the Industrial Disputes Act, 1947 (14 of 1947)] touching the constitution, management or business of a multi-state cooperative society arises- (a) among members, past members & persons claiming through members, past members & deceased members, or (b) between a member, past members & persons claiming through a member, past member or deceased member & the multi-state cooperative society, its board or any officer, agent or employee of the multi-state cooperative society or liquidator, past or present, or (c) between the multi-state cooperative society or its board & any past board, any officer, agent or employee, or any past officer, past agent or past employee, heirs or legal representatives of any deceased officer, deceased agent or deceased employee of the multi-state cooperative society, or (d) between the multi-state cooperative society & any other multi-state cooperative society; between a multi-state cooperative society & liquidator of another multi-state cooperative society or between the liquidator of one multi-state cooperative society & the liquidator of another multi-state cooperative society, such dispute shall be referred to arbitration. (2) For the purposes of Sub-section (1), the following shall be deemed to be disputes touching the constitution, management or business of a multi-state cooperative society, namely:-- (a) a claim by the multi-state cooperative society for any debt or demand due to it from a member or the nominee, heirs or legal representatives of a deceased member, whether such debt or demand be admitted or not; (b) a claim by a surety against the principal debtor where the multi-state cooperative society has recovered from the surety any amount in respect of any debt or demand due to it from the principal debtor as a result of the default of the principal debtor, whether such debt or demand is admitted or not; (c) any dispute arising in connection with the election of any. officer of a multi-state cooperative society. officer of a multi-state cooperative society. (3) If any question arises whether a dispute referred to arbitration under this Section is or is not a dispute touching the constitution, management or business of a multi-state cooperative society, the decision thereon of the arbitrator shall be final & shall not be called in question in any Court. (4) Where a dispute has been referred to arbitration under Sub-section (1), the same shall be settled or decided by the arbitrator to be appointed by the Central Registrar. (5) Save as otherwise provided under this Act, the provisions of the Arbitration & Conciliation Act, 1996 (26 of 1996) shall apply to all arbitration under this Act as if the proceedings for arbitration were referred for settlement or decision under the provisions of the Arbitration & Conciliation Act, 1996." Bare reading of the provisions as contained in Section 78 of the Act, 2002, it makes a provision for conducting an inquiry or directing some other person being authorised by him by order in writing in this behalf to hold an inquiry into the constitution, working & financial condition of a multi-state cooperative society. Similarly, Section 84 of the Act, 2002 makes provision for referring the matter to arbitration of the dispute involves. Any dispute arising in connection with the election of any officer of a Multi State Cooperative Society & such dispute shall be settled or decided by the Arbitrator to be appointed by the Central Registrar, who is to exercise his powers on application of the provisions contained in Arbitration & Conciliation At, 1996. Now coming back to the issue involved & the dispute in the Writ Petition, the whole reading of the Writ Petition, it appears that the Petitioner's complaint is on two folds: (a) The order issued vide Annexure-7 is an outcome of consideration of a representation/complaint dated 6.5.2011 & the complaint dated 6.5.2011 having gone infructuous, the order vide Annexure-7 become invalid. (b) Further the Annexure-7 is also invalid for having not been passed by affording opportunity of hearing to the Petitioner. Petitioner specifically alleged that there is no consideration of the complaint of the Opp. Party No. 4 dated 29.5.2011 & such allegation is made based on the repeated facts supported with documents supplied to the Petitioner vide Annexure-7 only referred to the complaint of Opp. Party No. 4 dated 6.5.2011. Petitioner specifically alleged that there is no consideration of the complaint of the Opp. Party No. 4 dated 29.5.2011 & such allegation is made based on the repeated facts supported with documents supplied to the Petitioner vide Annexure-7 only referred to the complaint of Opp. Party No. 4 dated 6.5.2011. On being asked the defect was only cured by issuing a corrigendum vide Annexure-10 dated 7.7.2011 by which an attempt was made to correctly refer the complaint petition at the instance of the Opp. Party No. 4. During course of argument by the parties, this Court in order to ascertain the genuineness in this aspect, by Order Dated 16.10.2014 directed the Assistant Solicitor General appearing for the Central Registrar of Co-operative Societies to produce the original file in which the relevant orders were passed. It is pursuant to this order, Learned Assistant Solicitor General produced the file involving the case. On scrutiny of the file, I find the file contents the complaint petition dated 29.05.2011 & the order sheet therein also discloses the matter involves the complaint petition dated 29.05.2011 filed on 31.05.2011 under Section 84(2)(c) of Multi State Co-operative Society Act, 2002 & the appointment of Arbitrator is also made basing on the consideration of the complaint dated 29.05.2011. It is under these circumstances, I answer question No. (a) holding that the appointment of Arbitrator is based on complaint dated 29.05.2011 & not dated 6.5.2011, as alleged." 6. Now coming to answer on the question No. 2 the allegation in the Writ Petition is that the provision made under Act, 2002 for appointment of Arbitrator is a pari materia as that provided under Section 11 of the Arbitration & Conciliation Act 1996. In referring to a decision rendered in the case of M/s. S.B.P. & Co v. M/s. Patel Engineering Ltd. & Anr, AIR 2006 S.C. 450, particularly referring to paragraph-36 of the aforesaid Judgment Learned senior Counsel appearing for the Petitioner contended that the law is well settled that an opportunity of hearing to the Opp. Parties before appointment of arbitrator is a must. In the present case, the complaint' of Opp. Party No. 4 is lodged under Section 84(2)(c) of the Act, 2002. Parties before appointment of arbitrator is a must. In the present case, the complaint' of Opp. Party No. 4 is lodged under Section 84(2)(c) of the Act, 2002. Section 84 of the Act, 2002 provides mechanism for reference of disputes to arbitration, whereas the contingency for appointment of an Arbitrator under the Arbitration & Conciliation Act, 1996 is always in' relation to violation of a contract between the parties & upon failure of obliging the conditions by any of the party or the parties in a matter of contract. Under the circumstances, I am of the considered View that the provisions contained in Section 84(2)(c) of the Act, 2002 & Section 11 of the Arbitration & Conciliation Act does not stand pari materia. The decision cited by the Learned senior Counsel on behalf of the Petitioner in the case of M/s. S.B.P. & Co v. M/s. Patel Engineering Ltd. & Anr, AIR 2006 S.C. 450 being passed considering the case of appointment of Arbitrator under the Arbitration & Conciliation Act, 1996 has no application to the present case. The ratio decided in the case (supra) is passed under a set of facts which has no similarity in the present case which stands completely on a different footing. In the present contingency, the provisions under Act, 2002 gives a right of appointment of Arbitrator to adjudicate the dispute involved with the Central. Co operative Registrar & is mere appointment of an Arbitrator to decide the lis giving opportunity to the parties concerned. In the present case, there is no test in deciding appointment of an Arbitrator on violation of conditions contained in a contract. Thus, there is no occasion of hearing the parties & as such the question number (b) is answered accordingly. Under the circumstances, I do not find any merit in the Writ Petition on both the counts which is accordingly dismissed. However, there shall be no order as to cost.