Court upholds arbitrator's findings, sets aside attachment orders on legal heirs' properties, remits issue for further determination. Petitions disposed.

The court upheld the arbitrator's findings on the merits but set aside the attachment orders on the properties of legal heirs, remitting the issue back to the arbitrator for determination. The petitions were disposed of with no order as to costs.

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Issues Involved:
1. Jurisdiction of the arbitrator.
2. Limitation of claims made by the Bank.
3. Violation of principles of natural justice.
4. Alleged bias of the arbitrator.
5. Impleadment of legal heirs in arbitration proceedings.
6. Attachment of properties of legal heirs.
7. Rejection of counterclaims without reasons.
8. Application of res judicata.

Detailed Analysis:

1. Jurisdiction of the Arbitrator:
The petitioners argued that the arbitrator lacked jurisdiction as the dispute should be adjudicated by the cooperative court. The court noted that the first respondent bank was converted into a Multi-State Cooperative Bank, thus ceasing to be governed by the Maharashtra Cooperative Societies Act. The Cooperative Court's order returning the plaint was accepted by both parties, and the petitioners filed counterclaims before the arbitrator without raising jurisdictional issues. The court held that the petitioners waived their right to challenge the arbitrator's jurisdiction under section 4 of the Arbitration & Conciliation Act, 1996.

2. Limitation of Claims Made by the Bank:
The petitioners contended that the claims were barred by the law of limitation. The court referred to section 85 of the Multi-State Cooperative Societies Act, 2002, which states that limitation for recovery claims starts from the date the member ceases to be a member. Since Petitioner No. 1 continued to be a member, the claims were not barred by limitation. The court also cited the Supreme Court's judgment in L.S. Synthetics Vs. Fairgrowth Financial Services Ltd., emphasizing that special statutes override the Limitation Act.

3. Violation of Principles of Natural Justice:
The petitioners claimed the award violated natural justice principles as the arbitrator did not verify the claims or allow cross-examination. The court found that neither party requested to consider the evidence from the Cooperative Court or sought to cross-examine witnesses before the arbitrator. The arbitrator decided based on pleadings and documents, and no prejudice was caused to the petitioners.

4. Alleged Bias of the Arbitrator:
The petitioners alleged bias, claiming the arbitrator was associated with the bank. The court found no such issue was raised before the arbitrator, and no application under section 12 read with section 13 of the Arbitration and Conciliation Act, 1996, was made. The arbitrator was appointed by the Central Registrar, not the bank, and no evidence of bias was provided.

5. Impleadment of Legal Heirs in Arbitration Proceedings:
The petitioners argued that legal heirs were improperly impleaded as they were not parties to the arbitration agreement. The court referred to section 84 of the Multi-State Cooperative Societies Act, 2002, which includes disputes involving legal heirs. The court held that legal heirs claiming through a member are bound by the arbitration clause and liable for the deceased member's obligations.

6. Attachment of Properties of Legal Heirs:
The court addressed whether the properties of legal heirs could be attached without determining if they inherited any property from the deceased borrowers/guarantors. The court noted that the arbitrator did not decide if the properties were self-acquired or inherited, despite the legal heirs providing uncontroverted evidence. The court ruled that the arbitrator should have clarified the liability extent and set aside the attachment order, remitting the issue back to the arbitrator for determination.

7. Rejection of Counterclaims Without Reasons:
The petitioners contended that their counterclaims were rejected without reasons. The court found that the evidence from the Cooperative Court was not part of the arbitration record, and the petitioners did not request its inclusion. The arbitrator's decision was based on the available pleadings and documents, and no procedural error was found.

8. Application of Res Judicata:
The petitioners argued that the arbitration proceedings were barred by res judicata due to the Cooperative Court's order. The court held that the Cooperative Court's order was not an adjudication on merits but a jurisdictional decision. Thus, the arbitration proceedings were not barred by res judicata.

Conclusion:
The court upheld the arbitrator's findings on the merits but set aside the attachment orders on the properties of legal heirs, remitting the issue back to the arbitrator for determination. The petitions were disposed of with no order as to costs.

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