Arbitration jurisdiction, limitation, and legal heirs' liability: attachment over disputed inherited property requires a finding on ownership first.
Jurisdictional and res judicata objections failed because the earlier cooperative court order merely returned the plaint after loss of jurisdiction, the parties accepted that order, and the later statutory arbitration was treated as maintainable; the petitioners also waived objection by participating without challenge. Limitation was not attracted because the special multi-state cooperative law governed computation, and the claim was filed within the relevant statutory period. No breach of natural justice or bias was established on the record. However, attachment over properties claimed by legal heirs could not continue without a finding on whether those assets were inherited from the deceased and the extent of liability, so that part was set aside and remitted for fresh decision.
Issues: (i) Whether the arbitral proceedings were without jurisdiction or barred by res judicata after the cooperative court returned the plaint on account of loss of jurisdiction; (ii) whether the claim before the arbitrator was barred by limitation; (iii) whether the award was vitiated by violation of natural justice or bias; and (iv) whether attachment could be continued against properties claimed by the legal heirs as their own properties without first deciding whether those properties were inherited from the deceased borrowers or guarantors.
Issue (i): Whether the arbitral proceedings were without jurisdiction or barred by res judicata after the cooperative court returned the plaint on account of loss of jurisdiction.
Analysis: The dispute had initially been before the cooperative court when the bank was still governed by the Maharashtra cooperative regime, but by the time the later claim was filed the bank had become a multi-state cooperative bank. The order returning the plaint had been accepted by both sides. The petitioners entered appearance before the arbitrator, filed counter-claims, and did not raise a jurisdictional objection under the Arbitration and Conciliation Act, 1996. The earlier order was not a decision on merits, and the later statutory arbitration under the multi-state enactment was treated as maintainable. The jurisdictional objection was therefore held to have been waived, and the plea of res judicata failed.
Conclusion: The challenge on jurisdiction and res judicata failed.
Issue (ii): Whether the claim before the arbitrator was barred by limitation.
Analysis: The multi-state enactment was treated as a special law for limitation purposes. The relevant statutory scheme fixed the computation of limitation by reference to the date on which the member ceased to be a member of the society. As the borrower continued to remain a member, and the special law governed the period, the claim filed before the arbitrator was not time-barred.
Conclusion: The limitation objection was rejected.
Issue (iii): Whether the award was vitiated by violation of natural justice or bias.
Analysis: The record did not show any application by the petitioners for taking the earlier cooperative court evidence on record in the arbitration or for cross-examining the bank's witnesses. The arbitrator decided the matter on the pleadings and documents before him, and no prejudice from denial of hearing was established. The allegation of bias was also unsupported, since no challenge was raised before the arbitrator under the statutory procedure and the arbitrator had been appointed by the statutory authority, not by the bank.
Conclusion: No violation of natural justice or bias was established.
Issue (iv): Whether attachment could be continued against properties claimed by the legal heirs as their own properties without first deciding whether those properties were inherited from the deceased borrowers or guarantors.
Analysis: The legal heirs had specifically claimed that the attached properties were their self-acquired properties and not assets inherited from the deceased, and that plea was not controverted by the bank. The arbitrator proceeded on the footing that attachment before award could continue merely because the bank apprehended dissipation of assets, without determining whether the properties actually formed part of the deceased estate. The Court held that the liability of legal representatives is confined to the estate inherited by them, and that in the final award the arbitrator was bound to decide whether the attached properties were inherited and, if so, to what extent. Since an award, once made enforceable, operates like a decree, the issue could not be left for the executing court in the manner adopted by the arbitrator.
Conclusion: The attachment over the properties claimed by the legal heirs could not be sustained without a determination of inheritance and extent of liability.
Final Conclusion: The monetary findings against the borrowers and guarantors were sustained, but the portions of the awards that kept the disputed properties under attachment were set aside and remitted for fresh decision on whether those properties were inherited assets of the deceased and to what extent the legal heirs were liable.
Ratio Decidendi: A legal representative can be fastened only to the extent of the deceased's estate in his or her hands, and an arbitral award that is intended to operate as an enforceable decree must itself decide the controversy over inherited assets before maintaining attachment over properties claimed as self-acquired.
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