TaxTMI 
TaxTMI 
2013 (4) TMI 413
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....ioner in Arbitration Petition No.85 of 2010 is a private limited company. One of the Director of first petitioner Mr. Abdul Latif Mahmood Dadan expired leaving petitioner no. 3 to 6 as his legal heirs. Petitioner no. 3 is one of the Directors of the first petitioner. Petitioner no. 3 is also one of the legal heirs of Mr. Abdul Latif Mahmood Dadan. Petitioner no. 4 to 7 are legal heirs of the said Abdul Latif Dadan. Petitioner No. 8 was a guarantor who had executed guarantee to secure the facilities granted by the first respondent to the first petitioner. Respondent nos. 2 and 3 are also guarantors. On 14th June, 1981 the first respondent granted a term loan, cash credit over draft and over drawn facility of Rs. 15 lacs in favour of the petitioner no. 1. The first respondent disbursed a sum of Rs. 1 lacs as term loan on 10th October, 1981 and Rs. 7 lacs as cash credit on 7th September, 1981 to the first petitioner against the hypothecation of machinery, equipments, accessories, land, building and plant, book debt, stock in trade, raw material etc. The Petitioner no. 8 and respondent nos. 2 and 3 stood as securities for repayment of the said loan. The first petitioner also executed h....
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....n the said application, it was the case of the first respondent that the petitioners herein were in the process of disposing of and/or creating third party rights in respect of their property. The learned arbitrator passed an exparte order and issued ad interim warrant of attachment in respect of various properties and directed to issue show cause notice to the petitioner no. 5 herein as to why the attachment should not be confirmed. 5th respondent filed an application in the month of October, 2007 inter alia praying for vacating the said ad interim order. The 5th petitioner also filed detailed affidavit. In the said affidavit, it was submitted by the 5th petitioner that various properties attached by way of ad interim order, were his properties and were not received from the borrowers or acquired by him from the loan alleged to be made available to the borrowers by the first respondent bank. The 5th petitioner also annexed copies of 7/12 extract claiming ownership and also Form No. 6 extract along with the deed of transfer confirming the transmission of each of the properties in his name by sale or by gift. It was contended by the petitioner no. 5 that the liability of the legal r....
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....the said award dated 10th June, 2009 the principal borrower, petitioner no.3 the legal heir of the original petitioner no. 2 who was also one of the director, petitioner no. 8 who was guarantor and the legal heirs of original petitioner no.2 have impugned the award by filing Arbitration Petition No.85 of 2010. The Petitioner No. 4 Ridhwan Abdul Latif Dadan has also filed a separate petition (23 of 2010) who is one of the legal heir of the original petitioner no. 2 for setting aside the impugned award. (3) The facts in Arbitration Petition No. 1160 of 2009 and Arbitration Petition No. 119 of 2010 are as under : (a) M/s. Thakur Electrical Engineering Works is registered Partnership firm. Petitioner no.2 and Mrs. Sharifa A. Thakur were partners of petitioner no. 1. Mrs. Sharifa Thakur expired on 31.12.2000 leaving behind petitioner no. 5 to 8 and respondent no. 2 as her heirs or legal representatives who were brought on record after demise of Mrs. Sharifa Thakur some time in the year 1988. The partners of the petitioner no. 1 applied for cash credit facility for the amount of Rs. 28 lacs against the security of stock in trade hypothecated by the petitioner no. 2 and the another ....
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.... learned arbitrator for raising the warrant of attachment and for vacating ad interim order. It was pleaded by the petitioner no. 4 that the property in question is his independent property and had not been inherited from the original respondent no.3 i.e. his wife Mrs. Sharifa Thakur. It was pleaded that the legal heirs were liable only to the extent of the shares of the estate of the deceased coming to their hands and the individual property of the legal heirs of the deceased cannot be attached and or legal heirs cannot be held liable for the debts of the deceased. It was also pleaded that the deceased wife of petitioner no. 4 did not leave behind her any estate at the time of her death. The Petitioner no. 4 also enclosed copies of the documents pertaining to the property in question to show that the said property never belong to the deceased and the same stood in the name of the petitioner in the records of the concerned authorities. Petitioner no. 4 applied for dismissal of the interim application filed by the first respondent under section 96 of the Multi-State Act, 2002 and for vacating ad interim order dated 18th October, 2007 passed by the learned arbitrator. There was no re....
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.... (d) The learned arbitrator was biased in favour of the bank by dispensing with due procedure of law. The learned arbitrator was professionally associated with the first respondent and has been on their panel and the award is thus vitiated by fraud or misconduct on the part of the learned arbitrator. (e) The award against petitioner 4, 5 and 6 is without jurisdiction as none of them were borrowers or guarantor or surety or executor of alleged security documents and could not have been impleaded as party respondent to the arbitration proceedings. There exists no arbitration agreement between the bank and the petitioner no. 4 to 6 who were impleaded as legal heirs of one of the party who was director of petitioner no.1. (f) The property of the legal heir i.e. petitioner no. 4 was his self acquired property and not inherited by him from Mr. Abdul Latif Mahmood Dadan and thus no award directing him to pay could be made against any of the legal heirs or in any event no attachment can be levied on the personal property of the legal heirs who had not inherited the said property from the deceased director of petitioner no. 1. (g) It is submitted that the counter claim has been r....
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.... for the bank submits as under : (a) With effect from 29th June, 1999 the first respondent bank was converted as Multi State Cooperative Bank within the provisions of Said Multi-State Cooperative Act, 2002 and therefore, the Cooperative Court by order dated 18th June, 2002 held that it ceases to have jurisdiction under section 91 of the Maharashtra Cooperative Societies Act and returned the plaint filed by the bank. After conversion of the Bank as Multi-State cooperative Bank, the bank ceases to be cooperative society and could not have continued its proceedings before the cooperative court. The order passed by the Cooperative Court was not challenged by the petitioners. The Petitioners also filed counter claim before the learned arbitrator and submitted to the jurisdiction of the learned arbitrator. In fact no application under section 16 was filed raising the issue of jurisdiction before the learned arbitrator. The learned counsel placed reliance upon the judgment of this court (R.D. Dhanuka,J.) delivered on 23rd January, 2013 in Arbitration Petition No. 935 of 2012 and other companion petitions in the case of Abhudaya Cooperative Bank Vs. Rainproof Exports Pvt. Ltd. The learn....
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....led fresh statement of claim before the learned arbitrator and placed reliance upon the evidence filed in the said proceedings. The petitioner never made any application before the learned arbitrator to consider the evidence led before the cooperative court as part of the record before the learned arbitrator and thus the same never formed part of the record before the arbitrator and thus was rightly not considered. (e) On the issue of affidavit in lieu of examination in chief in support of the counter claim filed by the petitioners and on the issue of opportunity not having been given to cross examine the witnesses of the respondent, it is submitted that the petitioners never applied for any opportunity to cross examine the witness of the bank. The right to cross examine the witnesses of the Bank was never refused by the learned arbitrator as the same was never claimed and thus right, if any was deemed to have been waived or abandoned. The learned counsel submits that though both the parties had filed affidavits to prove their claims, the learned arbitrator has not dealt with any of the affidavits while allowing the claims made by the bank though there was reference to such affi....
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....-examination could have been but was not directed. We think it likely that the respondent did not cross-examine the witnesses because there was nothing left for him to crossexamine. The learned Judges gave two reasons for accepting the statement of the respondent in preference to that of Mr. Byrne. One is that there was no record made in the depositions of the witnesses that there was no cross-examination. But what follows from this ? That, in fact, there was no cross-examination, which is a fact; not that the request of the respondent to cross-examine was disallowed. Then again, the learned Judges say that the respondent was present at the hearing of the writ petition before them, that they put questions to him, and formed the opinion that he was sufficiently intelligent, and that it was difficult to believe that he would not have cross-examined the witnesses. We are of opinion that this was a consideration which ought not to have been taken into account in a judicial determination of the question, and that it should have been wholly excluded. On a consideration of that record and of the probabilities, we accept the statement of Mr. Byrne as true, and hold that the respondent w....
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....ty can be fastened on the estate of the deceased, being inherited by his legal heirs, and the creditor can recover the dues out of the estate of the deceased." (h) On the issue whether the properties in respect of the legal heirs of the borrower and or guarantor can be attached or not and whether any award can be made in that regard by the learned arbitrator or not is concerned, it is submitted that where such legal heirs are legal representatives of the guarantor and or partner and as to whether the property in the hands of such legal heirs and representatives are their personal property or not or are inherited form such borrowers and or guarantors is the issue which has to be decided in the execution proceedings by appropriate court and could not have been decided by the learned arbitrator. It is submitted that as and when the decree is executed by the Executing Court on application to the bank, this issue can be decided under section 52 of the Code of Civil Procedure. The learned counsel placed reliance upon the judgment of the then Nagpur High Court in the case of Ranjitsingh Vs. Mt. Narmadi, AIR 1931 Nagpur 173 and particularly at page 174. (i) On the issue of credit not....
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....h award delivered by the learned arbitrator is upheld by rejecting this petition, it can be executed as if the decree of the court and in such event the Executing court would not be able to go behind the decree and therefore, the issue whether such properties were inherited by the said petitioners from the borrowers and/or guarantors or were self acquired properties would not be permitted to be gone into before the Executing Court. It is submitted that since it was admitted position before the learned arbitrator that these properties were personal properties of the legal heirs as would be reflected from the application made by the bank itself and is also clear from the order passed by the arbitrator, there was no such issue required to be left open for adjudication by the Executing Court as sought to be canvassed by the Bank. 7. I shall first deal with the issue raised by the petitioner as to whether the learned arbitrator did not have jurisdiction to entertain the dispute in view of the position that section 91 of the Maharashtra Cooperative Societies Act was applicable to respondent no.1 bank when the dispute was filed by the first respondent before the cooperative court and a....
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....ch multi-state cooperative bank and not Maharashtra Cooperative Societies Act. Paragraphs 24, 25, 27, 31, 32 of the judgment of this court in the case of Abhyudaya Cooperative Bank Ltd. vs. Rainproof Exports Pvt. Ltd., delivered on 23rd January, 2013 read thus : "24. It is not in dispute that w.e.f. 11th January, 2007, the petitioner was converted into a multi state bank and has been governed under the provisions of Multi State Act. It is not in dispute that certificate to that effect has been issued by the Central Registrar under Section 22 of the Multi State Act, 2002 in favour of the petitioner. In view of section 22(5) (a), from the date of amendment, the petitioner has become a multi state co-operative society. Under section 2 of the Act, it is provided that the said Act shall apply to all multi state co-operative societies. It is not in dispute that the registration of the petitioner society as co-operative society came to be cancelled on the petitioner becoming a multi state cooperative society w.e.f. 11th January, 2007. 25. It is clear that by the order passed by the Assistant Registrar, the petitioner bank has been already permitted to withdraw the said application f....
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.... to the revisional authority for disposal of the application. In my view, the view taken by this court that section 84 of the Multi State Act would apply to the case which are to be instituted under the said Act and would not apply to the case which had already instituted under another Act including Maharashtra Cooperative Societies Act is in that context and considering the peculiar facts of that case. In the facts of this case, the petitioner has already withdrawn application filed under section 101 of the Act in view of the petitioner having become Multi State Co-operative Society. The proceedings filed by the respondents impugning the order of the Assistant Registrar are already dismissed. The arbitration proceedings have already commenced. The respondents have already filed their written statement before the learned arbitrator. The petitioner bank had filed second application for withdrawal of proceedings before the Assistant Registrar after initiating proceedings under section 84 of the Multi State Act. The petitioner would not have proceeded with two parallel proceedings in respect of the same cause of action, one before the Assistant Registrar and another before the arbitra....
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....circumstances, the petitioner bank filed another application on 25th March, 2009 for seeking withdrawal of application filed under section 101 in favour of the petitioner already having filed dispute under section 84 of the Multi State Act. In my view, application dated 25th March, 2009 filed by the petitioner was in order and was not barred by res judicata." 10. Though the learned counsel appearing for the petitioner sought to distinguish the judgment of this court in the case of Abhyudaya Cooperative Bank Vs. Rainproof on the ground that the M.C.S. Act, is self-contained code and the bank cold not have adopted the proceedings under the Multi-State Cooperative Societies Act, 2002 and that the change of status does not permit the bank to invoke provisions of the Multi-State Cooperative Societies Act is concerned, in my view once the status of respondent no.1 bank was changed from Cooperative Society to Multi-State Cooperative Society, it ceased to be governed by the provisions of the said Maharashtra Cooperative Societies Act. Both the parties have accepted the order passed by the Cooperative court returning the plaint and has filed their respective claims before the learned arb....
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.... its nature and functions may be a court within the meaning of Section 3 of the Indian Evidence Act 1872 or Section 3 of the Limitation Act, 1963 but having regard to its scope and object and in particular the fact that it is a complete code in itself in our opinion, the period of limitation provided in the schedule appended to the Limitation Act. 1963, will have no application. For the applicability of Section 29(2) of the Limitation Act, the following requirements must be satisfied by the Court invoicing the said provision: (1) There must be a provision for period of limitation under any special or local law in connection with any suit, appeal or application. (2) Such prescription of the period of limitation under such special or local law should be different from the period of limitation prescribed by the Schedule to the Limitation Act 1963. 39. In terms of the provisions of the said Act no period of limitation is prescribed, evidently because the Parliament thought it to be wholly unnecessary. Once the statutory operation relating to the attachment of the property belonging to a notified person comes into being, the duties and functions of the Special Court start. In r....
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....respondent. Both the parties made their respective submissions before the learned arbitrator on the basis of the pleadings and documents filed before the arbitrator. Though there is reference to the affidavit filed by the parties in the award, perusal of the award indicates that no reliance is placed by the learned arbitrator on the affidavit filed by the petitioner or the respondent bank while allowing the claims made by the first respondent and rejecting the counter claim made by the petitioner. In my view thus there was no prejudice caused to the petitioner even if the respondent No. 1 Bank did not make their witnesses present for cross examination by the petitioner. Record does not indicate that witness of petitioner was also available for crossexamination by the Bank. As no request was made before the learned arbitrator for examining the petitioner's witnesses or for cross examining the respondent's witnesses, the petitioner is deemed to waive their rights to cross examine the witnesses of the first respondent, if any. There is thus no violation of principles of natural justice committed by the learned arbitrator. 17. As far as plea of bias raised by the petitioner in the p....
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....ers and deceased members, or (b) between a member, past members and persons claiming through a member, past member or deceased member and the multi- State co- operative society, its board or any officer, agent or employee of the multi- State co- operative society or liquidator, past or resent, or (c) between the multi- State co- operative society or its board and 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 employe of the multi- State co- operative society, or (d) between the multi- State co- operative society and any other multi- State co- operative society, between a multi- State cooperative society and liquidator of another multi- State cooperative society or between the liquidator of one multi- State cooperative society and 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 co- operative society, namely:- (a) a claim by th....
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.... deceased. 20. As far as reliance on the judgment of the Supreme Court in the in the case of State of Rajasthan Vs. Rao Raja Kalyansingh (supra) by the petitioner is concerned, Paragraph 6 of the said judgment is relied upon by the petitioner which reads thus: "6. Though this issue is not very specific but undoubtedly it covers the plea taken by the respondent in paragraph 1 of his written statement. That apart the plea of maintainability of the suit is essentially a legal plea. If the suit on the face of it is not maintainable, the fact that no specific pleas were taken or no precise issues were framed is of little consequence." 21. In my view on conjoint reading of section 4 and section 16 of the Arbitration & Conciliation Act, 1996, the petitioner not having raised the plea of jurisdiction before the learned arbitrator can not be allowed to raise such plea in this application filed under section 34 for the first time. Reliance placed by the petitioner thus on the judgment of the Supreme Court in the case of State of Rajasthan Vs. Rao Raja Kalyan Singh (supra) is of no assistance to the petitioner. 22. In my view there is no substance in the plea of the petitioner tha....
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....for which attachment was sought by the bank were personal properties of petitioner no.4 which properties were not received from the borrowers or acquired by him from the loan alleged to have been made available to the borrowers by the bank. Petitioner no.4 also annexed documents in support of the plea of ownership and and form no.6 extract alongwith the deed of transfer confirming the transmission of each of the properties by sale or by gift. The petitioner no.4 also placed reliance upon the judgment of this court in Writ Petition No. 1056 of 1982 in support of his plea that the liability of the legal representatives is limited to the extent of the properties of the deceased which has come to his hands. It was also pleaded that his properties were not in any way related to or connected with the loan transaction between the bank and their borrowers. It was pleaded that the borrowers or other parties to the proceedings had no right, title or interest in the said properties which were properties of petitioner no.4 exclusively. 26. There was no reply filed by the bank controverting the averments made by petitioner no.4. The application filed by the bank under section 96 of the said ....
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....ward discloses the properties which were claimed by the one of the legal heir as his individual properties. 28. Perusal of the records in Arbitration Petition No. 1160 of 2009 and 119 of 2010 indicates that the bank had applied for an order of warrant of attachment in respect of the properties standing in the name of the original respondent 3(f) [petitioner no.4 herein]. In the application filed by the bank under section 96 of the said Multi-State Act, the bank had prayed for warrant of attachment against the legal heirs of Mrs.Sharifa A.Thakur who was one of the partner of M/s.Thakur Electrical Engineering Works. In the said application filed by the bank, it was pleaded that the properties at Village Rajapur bearing Gat No. 68A/1A 1A/17 having area 28 acre and holding account no. 72 were properties of the said legal heirs. In application for award before the judgment it was pleaded by bank that the respondent no.3(f) to the said application (petitioner no.4 herein) was likely to dispose of the land standing in his name and if he succeeds, the bank would not be able to recover the amount claimed in the claim petition. The petitioner no.4 herein made an application before the lea....
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....he arbitrator is satisfied that a party to any reference made to him under section 84 with intent to defeat or delay the execution of any decision that may be passed thereon is about to- (a) dispose of the whole or any part of the property; or (b) remove the whole or any part of the property from its existing precincts, the arbitrator may, unless adequate security is furnished, direct conditional attachment of the said property or such part thereof as he deems necessary. (2) The attachment under sub- section (1) shall be executed by a civil court having jurisdiction in the same way as an attachment order passed by itself and shall have the same effect as such order. 31. Section 52 of the Code of Civil Procedure, 1908 reads thus :- "52. Enforcement of decree against legal representative (1) Where a decree is passed against a party as the legal representative of a deceased person, and the decree is for the payment of money out of the property of the deceased, it may be executed by the attachment and sale of any such property. (2) Where no such property remains in the possession of the judgment-debtor and he fails to satisfy the Court that he has duly applied such....
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....e against the respondent. In the pleadings the defendant contended that she was not in possession of her mother's property. The plaintiff's pleader stated in reply that the question of assets should be left to be determined in execution and he joined issue on other points. An issue was framed in these terms: " Can plaintiff claim decree against the estate of her father inherited by her after her mother's death?" The respondent's learned Counsel contends that this issue arose out of the contentions of the parties regarding the liability of the respondent as legal representative of Mt. Rukmabai. This argument is, in my opinion, unsustainable. The aforesaid issue contemplated liability of respondent as a reversioner to her father and the object thereof was to determine whether the debt contracted by Mt. Rukmabai was binding on the assets of her husband. That is the plain meaning of that issue. My attention has been drawn to the decision passed in Rambhau v. Ramkrishnapuri Civil Revn. No. 353 in which it was held that: "an issue having been raised as to the existence of assets belonging to the deceased in the hande of his son, the Judge was bound to decide it." The rule laid d....
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.... me clear, as observed by Mr. Mulla, p. 181, Edn. 9 of 1930, that the plea is confined to execution only: see also Shankarlal v. Ganesh Singh and Rajaram v. Nathu . It is contended for the respondent that the plaintiff is not entitled to the relief asked for in second appeal. I do not see any reason why he should not be entitled to this relief. Order 7, Rule 7, Civil P.C., states: "Every plaint shall state specifically the relief which the plaintiff claims either simply or in the alternative, and it shall not be necessary to ask for general or other relief which may always be given as the Court may think just to the same extent as if it had been asked for." The plaintiff has pleaded that the respondent being the daugther of Rukmabai is her heir and representative and has also asked for a decree, against her. He in reality asked for more than he was entitled to. There is nothing to prevent the Court from giving him as much relief as he is entitled to. The appellant has now claimed for what was already covered by the relief which he asked for in the plaint. The prayer made by him now is based upon admitted facts and all I have to see is whether he is under law entitled to it....
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....hat subject to Part I, an award shall be final and binding on the parties and persons claiming under them respectively. It is also clear that if an application filed under section 34 is refused, the award shall be enforced under the Code of Civil Procedure, 1908 in the same manner as if it were a decree of the court. Considering these two provisions, I am of the view that in a situation where the legal heirs pleaded before the Arbitral Tribunal that they have not inherited any properties from the deceased borrowers and/or guarantors and have produced the documents in support of such plea which was not controverted by the applicant seeking attachment, the Arbitral Tribunal was bound to decide such claim made by the legal heirs while deciding the claim of the applicant in the same award. 35. In view of Section 36 of the Arbitration and Conciliation Act, 1996, if the petition filed by the legal heirs is rejected, in my view executing court will not be able to go into the issue while executing such award as to whether the legal heirs had inherited any property from the borrowers and/or guarantors and/or whether any such property remained in possession of the judgment debtors. The ex....
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.... enforceable as a decree of court in view of section 36 of the Arbitration and Conciliation Act, 1996 on a refusal of application under section 34 by the Court, such issue which was raised before the learned arbitrator by the legal heirs can not be overlooked by the learned arbitrator and cannot be left to be determined by the executing court to adjudicate. In my view impugned award is incomplete in this respect. 39. In case of Oriental Bank of Commerce vs. Mrs.Rajrani AIR 2005 MP 49, the issue arose for the consideration of the Madhya Pradesh High Court as to whether in case the legal heir raises the plea that he has not inherited any property from the party defendant to the suit in a suit for recovery of a debt and was not in possession of any property left by the deceased, such plea was available to the legal heirs in the suit itself and cannot be agitated in the execution proceedings. The Division 1 AIR 2005 MP 49 Bench of the Madhya Pradesh High Court dismissed the appeal filed by the appellant bank. The Division Bench of the Madhya Pradesh High Court followed the judgment of the High Court reported in AIR 1948 Nagpur, 168. The relevant paragraphs of the judgment in case of....
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.... Nagpur 168, following observations were made by Justice Bosc J., as he then was:-- "...... a difference of opinion emerges. Some Judges hold that in such a case the plaintiff is entitled to a decree the moment he proves that the defendant is an heir and that the correct stage at which to ascertain whether there are assets is in execution. Others hold that the existence of assets must be disclosed in the trial itself. I need not decide this matter in revision. All that is necessary to state in this case is that there is a difference of opinion on this point which has not been settled in this Province." But then it was further observed by him : "...... I think the plaintiff ought to have been told that he would be required to establish this in the suit and that it would not be enough to leave the matter to the execution stage. I think this was all the more necessary in a case where the defendant did not appear." In the present case a plea was taken by the respondent that she was not liable to pay the said debt because the deceased had left no assets to her. The appellant/Bank had full knowledge of this plea and even evidence was adduced in the Trial Court to that extent.....
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....tions 35 and 36 of the Arbitration and Conciliation Act, 1996 and section 52 of the Code of Civil Procedure, 1908 in the impugned award while attaching the properties. Section 96 of the Multi State Cooperative Societies Act, 2002 cannot be read in isolation. 41. In my view, a legal heirs and representatives are entitled to raise an issue that the deceased has left no assets, or that they were not in a possession of any property left by the deceased or the same was not available to them in the arbitration proceedings itself. In my view, the learned arbitrator is bound to decide the said issue in the impugned award itself after considering the material facts and documents into consideration. 42. Perusal of the impugned award indicates that the learned arbitrator has considered all other aspects in the matter on merits and have rendered a finding of fact against the borrowers and the guarantors which findings are not perverse and thus no interference is warranted with such finding of facts. The learned arbitrator in my view was right in passing a decree against the borrowers and the guarantors and was right in directing the legal heirs to pay the amount directed to be paid by th....