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Cites 5 docs
Section 30 in The Arbitration And Conciliation Act, 1996
C.Nandini & Ors. vs J.Harsha on 13 July, 2009
The Co- Operative Societies Act, 1912
Section 15 in The Arbitration And Conciliation Act, 1996
The Arbitration And Conciliation Act, 1996

Bombay High Court
Mr. Yusufkhan Fakhrookhan Tadvi vs Konkan Mercantile Co-Operative ... on 7 May, 2013
Bench: Anoop V.Mohta

1 ARBP.216-2013 acd

IN THE HIGH COURT OF JUDICATURE AT BOMBAY rt

ORDINARY ORIGINAL CIVIL JURISDICTION ou

ARBITRATION PETITION NO. 216 OF 2013 Mr. Yusufkhan Fakhrookhan Tadvi ..Petitioner. C

Vs.

Konkan Mercantile Co-operative Bank Ltd. And Others. ..Respondents. h

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Mr. Pankaj Kowli i/b Dr. M. Shah Alam Khan, Advocate for the Petitioner.

Mrs. Alisha Lambay i/b Lambay & Co., for Respondents. H

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CORAM : ANOOP V. MOHTA, J.

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DATE : MAY 07, 2013.

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ORAL JUDGMENT:

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1 Rule, returnable forthwith. Heard finally by consent of the parties. 2 The Petitioner has challenged an Award dated 22 nd January 2013 B

passed by the Sole Arbitrator, whereby his Dispute Application was dismissed with costs.

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3 The Petitioner was a Member of Respondent No.1-Bank. He was a Member of Tadvi Bhil community, a Scheduled Tribe and was elected as a ou

Member of the Board of Directors for the period from 1994-2003. The caste validity certificate of the Petitioner was cancelled. The Petitioner has filed Writ C

Petition. The same is pending in Aurangabad High Court Bench at Aurangabad. The Award was passed against the Petitioner and directed him to repay the h

benefit derived by virtue of elected Member of the Board of Directors. The ig

Petitioner challenged the Award in this High Court. The Award has attained finality. The Respondent No.1-Bank has initiated execution proceedings to H

recover the amount as awarded. The Petitioner opposed the action of the Bank along with others, of enhancement of Membership amount on 10 th September y

2012. The Bank did not reply to the same. ba

4 By letter dated 1st October 2012, Respondent No.1-Bank intimated om

to the Petitioner that the membership and amount of shares of Rs.750/- of membership has been forfeited against the recovery of alleged dues. The Petitioner therefore raised the dispute after giving legal notice to withdraw the B

said arbitration proceedings as that was amount to cancellation/cessation/forfeiture of share and membership without prior notice and opportunity.

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5 The proceedings as initiated by the Petitioner against the Award have not been attained finality when the Respondent No.1-Bank issued the ou

impugned letter as proceedings have been pending in the High Court arising out of the Award. The Petitioner has deposited the amount as per directions of the C

High Court dated 13th April 2007. The Petitioner therefore raised the dispute under Section 84 of the Multi-State Co-operative Societies Act, 2002 (for short h

'Act of 2002'). The parties appeared before the learned Arbitrator as appointed by ig

the Central Registrar under the Act of 2002. On 22nd January 2013, the learned Arbitrator has passed the impugned Award. H

6 The learned Arbitrator held that the Petitioner failed to prove that y

the decision of the Bank to cancel his membership and forfeit his share amount ba

(750) is illegal, malafide, discriminatory and unwarranted and further held that the Bank proved that the disputant suffered loss of membership as a consequence om

of recovery action of the Bank against the dispute which has become final. 7 The Petitioner therefore against the award/order, invoked Section B

34 of Arbitration and Conciliation Act, 1996 (for short 'Arbitration Act') and filed the present petition on 22nd February 2013. 3/ 9

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8 The Bank has filed reply on 14th March 2013. In view of the subsequent development, the Petitioner has filed affidavit dated 6 th May 2013. ou

The Bank has filed affidavit dated 7th May 2013 and reiterated their action. C

9 The Bank has also announced the election. The last date of receiving objection to the voters list is 9 th May 2013 and for finalization of voters h

list, the date is 13th May 2013. The subsequent events of depositing the amount ig

as directed and even including pendency of the Writ Petition filed by the Petitioner with regard to the basic issue of caste certificate, in my view may not H

be relevant for deciding the controversy so raised by the Petitioner in the present case. Therefore, in view of the declared election schedule and as contended, I am y

inclined to proceed with the matter on the basis of events and the date of cause of ba

action initiated by the Bank on 1st October 2012. om

10 Considering the averments so made by the parties involving around the admitted position on record, one thing is clear that the Bank before taking any action as mentioned in the impugned letter, never called upon the Petitioner B

to give explanation and/or even no show cause notice was given. The effect of this action is nothing but forceful forfeiture of the share amount and the abrupt cessation of membership.

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11 The Bye-laws of the Bank, which is a registered Bank under the Act of 2002, deal with the aspect of disqualification of the Member, expulsion of ou

membership, cessation of membership, share certificate, lien of share, dividend and deposit and transfer of shares. Section 30 of the Act of 2002 deals with the C

aspect of expulsion of membership, which is similar to Clause 15 of the Bye- laws.

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The learned Counsel appearing for the Bank submitted that in view of the admitted position as the Petitioner defaulted in making payment in spite H

of the Award passed against him, the Board of Directors in view of the Bye-laws clauses 13,16,24 and 25 resolved to forfeit the share amount and also the y

membership. The Petitioner, being defaulter, could be continued as a Member of ba

the Bank. The action therefore so taken was well within the purview of the Bye- laws and the policy of the Bank. om

14 Admittedly, the action so initiated resulted into abrupt cessation of membership of the Petitioner. This itslef means the Petitioner who was active B

member of the Bank since so many years and who was always interested in taking part in the affairs of the Bank, by this action has been expelled from the membership. The nomenclature of "cessation of membership" and/or "disqualification of membership" is no way permit the Board of Directors of the 5/ 9

::: Downloaded on - 09/05/2013 23:39:41 ::: 6 ARBP.216-2013 Bank, even by taking majority decision, to remove any Member from the rt

membership, with immediate effect in such fashion. ou

14 As recorded above, there was no show cause notice and/or any opportunity or any hearing given to the Petitioner before taking such drastic C

action. I am inclined to observe that this action amounts to expulsion of the membership as contemplated under Section 30 read with Section 15 of the Bye- h

laws. Such action requires a majority resolution to be passed by not less than ig

2/3rd of the Members. It also requires giving reasonable opportunity to the concerned Member before taking action of expulsion. The effect of this H

expulsion is that the Petitioner would not be in a position and/or eligible for readmission as a Member of the Bank for a period of one year from the date of y

such expulsion. Cessation of membership of the Bank definitely falls within the ba

ambit of this Section and, therefore, the Petitioner by this action debarred from taking admission as a Member of the Bank for a period of one year apart, from om

participation in any election of the Bank. 15 Therefore, without going further into the controversy so raised with B

regard to the Petitioner's liability and/or issue with regard to the pendency of his matters in this Court and also the Execution Application as filed by the Bank, I am not inclined to decide anything so far as those proceedings are concerned. All points are kept open.

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16 However, for the reason so recorded as above I am inclined to ou

observe that the action of termination of membership itself is in breach of principle of natural justice and contrary to the provisions of laws, as well as, the C

Bye-laws and therefore same is unsustainable. The findings given by the learned Arbitrator by overlooking the provisions of the laws and Bye-laws and by h

accepting the case of the Bank without considering the basic principle of laws as ig

I had already observed in the case of Prakash Kumar Sinha Vs. Konkan Mercantile Cooperative Bank Ltd. [2012 (6) Mh. L.J. 274] and also in the case of H

Dr.Dalvi Ali Abdul Quadar Vs. Konkan Mercantile Co.op. Bank Ltd. in Arbitration Petition No.217 of 2013 dated 3rd May 2013, I have observed as y

under:

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"Both these provisions provide the majority resolution and the hearing before taking such action of expulsion. Admittedly, no such procedure whatsoever followed by the bank. No show cause om

notice was issued; and no opportunity whatsoever was given to the petitioner before taking such action, which resulted into the termination of membership. The whole action in my view is contrary to the provisions of law." B

17 I am therefore inclined to set aside the Award so passed by the learned Arbitrator. In the result, the following order: i) Impugned Award dated 22nd January 20123 is quashed and set aside.

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::: Downloaded on - 09/05/2013 23:39:41 ::: 8 ARBP.216-2013 ii) The Dispute Application No.384 of 2012 is allowed in terms rt

of prayer clauses (a) and (b). The prayer clauses (a) and (b) thus read as under:

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(a) This Hon'ble Authority be pleased to declare and pass Award declaring therein that the decision dated 27.9.2012 of Respondent-Bank, forfeiting the membership no.13766 and C

share amount of the Disputant is illegal, unlawful, null and void and further it is declared that the Disputant continues to be a member and shareholder of the Respondent No.1-Bank. (b) This Hon'ble Court be pleased to pass an Award declaring therein that the Respondent No.1 was not entitled h

to forfeit the membership no.BR/13766 and share amount of Rs.750/- and be further pleased to direct the Respondent ig

No.1 to restore the said membership no.BR/13766 and share amount to Rs.750/- to the share account of the Disputant with Respondent No.1-Bank. H

iii) The Arbitration Petition is allowed in terms of prayer clause y

(i). Prayer clause (i) of the petition reads as under: ba

(i) This Hon'ble Court be pleased to call for records, and proceedings of the Impugned Award dated 22.01.2013 passed by Respondent No.12 which is at Exhibit 'E' of this Petition and be pleased to examine the legality, validity and om

propriety of the said Award and order dated 22.01.2013 of the Respondent No.12 and be pleased to quash and set aside said Award and order dated 22.01.2013. iv) There shall be no order as to costs. B

v) Parties to act upon the authenticated copy of the order. 8/ 9

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18 The learned Counsel for Respondent No.1-Bank prays for stay to the above order, dictated in open Court. Considering the reasons so given and in ou

view of the urgency, I am not inclined to accept the prayer, and the the same is rejected.

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(ANOOP V. MOHTA, J.)

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