TaxTMI 
TaxTMI 
2026 (6) TMI 700
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....arned Sole Arbitrator was appointed under Section 84 of the Multi-State Co-operative Societies Act, 2002 (for short, "MSCS Act") in applications filed by Abhyudaya Co-operative Bank Ltd. for recovery of the outstanding amounts. Common submissions were advanced by learned counsel for the parties and the Petitions are being disposed of by this common judgment. FACTUAL MATRIX: 2. Commercial Arbitration Petition No. 843 of 2024 has been filed by Ajeet Madhukar Mulay, who was the original Opponent No.5 in Arbitration Case No. ARB/ACB/VNL/2064 of 2022. The Claimant in the arbitration case is Abhyudaya Co-operative Bank Limited. The principal borrower was M/s. Nirmangold Alloys Private Limited, which was undergoing corporate insolvency process and in view of the moratorium was not impleaded as party. Ajeet Mulay was impleaded in his capacity as guarantor alongwith other guarantors and Directors of M/s. Nirmangold Alloys Private Limited, who had given personal guarantee for repayment of the debt.. 3. Commercial Arbitration Petition No.849 of 2025 has been filed by Monica Ajeet Mulay who was the original Opponent No.6 in Arbitration Case No ARB/ACB/VNL/2065 of 2022. The Claimant wa....
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.... in view of the Petitions filed by the Opponent Nos. 1 and 4 i.e. Bhushan Patil and Anita Patil under Section 94 of IB Code, the Learned Sole Arbitrator held that as moratorium had commenced, the arbitration cannot be proceeded against the Opponent Nos. 1 and 4. 8. The impugned Award records the stand taken by the present Petitioner raising an objection to the jurisdiction of the Tribunal. It was contended that the documents of guarantee, arbitration agreement and deeds of mortgage are insufficiently stamped and unenforceable in law. During corporate insolvency resolution process, it was revealed by the forensic audit team appointed through the Resolution Professional that there was fraud by the Company and therefore, there is no legally enforceable debt against the Petitioner. The deed of guarantee is vitiated by fraud which is not non-arbitrable. The membership of the Bank and the execution of consent letters was denied. It was contended that the Petitioner is not signatory to the restructured credit facility and on restructuring of credit facility all prior sanctioned letters stood cancelled and the surety stand discharged, the contract being varied. 9. In Arbitration Case....
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....cuments and there is no mismatch. (e) As per the guarantee executed by the Petitioners, the available rights under Section 133, 134, 135, 139 and 141 of Indian Contract Act, 1872 stand waived and restructuring of facilities was permitted. There is no discharge from the liability. (f) In view of Section 2(4) of Arbitration Act, Part I of Arbitration Act applies to MSCS Act as the enactment is an arbitration agreement and the contention of insufficiency of stamp duty on arbitration agreement is rejected. (g) In so far as insufficiency of stamp duty on guarantee agreement and mortgage deed are concerned, Section 4 of Maharashtra Stamp Act is applicable where there are several instruments and the principal instrument is chargeable with duty. Registering Authority has not raised any dispute about insufficiency of stamp duty. Petitioners have not raised any dispute at the execution of the documents regarding insufficiency of stamp duty and have agreed in writing that no objection will be raised for insufficiency of stamp duty. ORDER DATED 28th APRIL, 2022 PASSED ON APPLICATION FILED UNDER SECTION 12 r/w Section 13 OF ARBITRATION ACT : 13. The Learned Sole....
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....nsidering the imposition of moratorium, the Learned Arbitrator stayed the proceedings only against them, which is contrary to the settled position of law. 17. He submits that prior to filing of the statement of claim, Nirmangold Alloys Private Limited went into insolvency and under Section 14 of the IB Code, moratorium was imposed qua the debt and hence the arbitration proceedings could not have proceeded even against the present Petitioners. 18. He submits that the Arbitrator has violated the principles of natural justice by denying the Petitioners leave to cross examine the Bank's witness and denying opportunity of filing evidence. He points out that the Learned Arbitrator has held that the Petitioner has not adduced any evidence and that his reply can be considered as evidence. He submits that the Petitioner filed his written statement on 20th October, 2023 after the issues were framed and despite the application dated 6th February, 2024 requesting for framing of issues, the Learned Arbitrator has rejected the same on the ground that CPC is not applicable. 19. He submits that the Arbitration Award suffers from patent illegality as it is based on unverified and unproved ....
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.... cannot be accepted that the guarantor is discharged from the liability is contrary to statute and is patently illegal. 26. He points out that in so far as insufficiency of stamp duty in respect of seven guarantee agreements and six mortgage deeds, the Learned Arbitrator has held that it is the borrower, who has to bear the burden of stamp duty and that the Petitioner in writing has agreed that he will not raise any objection for insufficiency of stamp duties, which is contrary to statute. In support, he relies upon the following decisions: (i) Vedansh Hospitality and Resorts Ltd. and Ors. vs. New India Co-operative Bank Ltd. & Ors. Arbitration Petition No.484 of 2012 dated 29.01.2013, (ii) M/s. Divya Enterprise and Ors. in Capri Global Capital Limited vs. M/s.Divya Enterprise (Partnership Firm) and Ors. IA(L) No. 25700 of 2025 in Com.Suit (L) No.23360 of 2025 dated 09.10.2025, (iii) Deepti Prakash Ghare vs. NKGSB Co.Op. Bank Ltd. Comm. Arbitration Petition (L) No.6358 of 2022 dated 07.01.2023, (iv) Neepa Real Estate Pvt. Ltd. vs. State of Maharashtra and Ors. Writ Petition No. 1395 of 2023 dated 13.12.2025, (v) M/s. Hotel Sea Point P....
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.... in so far as absence of admission and denial of documents is concerned, there is no prejudice caused to the Petitioners. 29. He submits that the disclosures given by the Arbitrator was in substantial compliance of the law. He would further submit that the moratorium under Section 14 of the IB Code was not applicable to the Petitioners. He would submit that insofar as the objection that no consent of the Petitioner was taken to conduct arbitration petition is concerned, the Arbitrator was appointed by the Central Registrar and no prejudice is caused to the Petitioners by holding the proceedings at Mumbai. He submits that the written statement itself was filed belatedly and the application for framing of issues was not submitted till the end of the proceedings. 30. He submits that the objection to jurisdiction on the ground of Petitioners not being the member of the Respondent has been sufficiently negated by the membership proof which is already produced on record. He submits that it is not the case of the Petitioners that the membership forms are forged. 31. He submits that the Petitioner's submission on illegal findings on forgery signature by comparing documents is an a....
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....on as per applicable law or the arbitral award is in conflict with public policy of India. Explanation I clarifies the eventualities in which an arbitral award can be said to be in conflict with the public policy i.e. if (a) it's making is induced by fraud, corruption or in violation of Section 75 or Section 81 of Arbitration Act, (b) when it is in contravention of fundamental policy of India law or (c) when it conflicts with the most basic notions of morality or justice. Explanation II provides that no review on the merits shall be undertaken when determining a contravention of fundamental policy of Indian Law. Section 34(2A) introduced by Amendment Act of 2016 provides an additional ground of patently illegality appearing on the face of the Award for setting aside domestic Award. The proviso clarifies that the award shall not be set aside merely on the ground of erroneous application of the law or by re-appreciation of evidence. 37. The impugned Awards are challenged broadly on the following grounds: (a) conduct of arbitration proceedings despite the moratorium imposed under IB Code by disregarding the judicial pronouncements. (b) violation of principles of n....
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....tion 96 of IB Code premised on filing of Petitions under Section 94 of the IB Code for personal insolvency. Under the statutory provisions of IB Code, the filing of applications under Section 94 of IB Code triggers an interim moratorium in relation to all the debts from the date of filing of the application and during the interim moratorium any legal action or proceeding pending in respect of any debt shall be deemed to have been stayed. 41. The Learned Arbitrator accepted the imposition of statutory moratorium and stayed the arbitration proceedings qua Bhushan Patil and Anita Patil, however, continued the proceedings as against the other guarantors including the Petitioners. Mr. Totala has pointed out that upon earlier application of Bhushan Patil being dismissed, a fresh application was filed by him. The position of law which has been settled by judicial pronouncements of this Court as well as the Hon'ble Apex Court in the context of interim moratorium under Section 96 of IB Code is that the moratorium is imposed on the debt and not the debtors. The filing of the personal insolvency applications extends the benefit of moratorium not only to the applicants but has the effect of....
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....t matter of one of the guarantors on the one hand, and the debt of the other guarantors, in this case the legal heirs of original respondent No. 4, Mr. B.L. Passi. Though it can be said that the liability of original respondent No. 4, late Mr. B.L. Passi, was co-terminus with the principal borrower and the other guarantors, the liability of the present respondents, would be restricted to the assets of late Shri B.L. Passi, to the extent to which they would inherit the same. Be that as may, a distinction cannot be carved out, in respect of the "debt", award in respect of which is claimed in the arbitration proceedings, for the purpose of continuation of the arbitral proceedings, between the liability of the principal borrower/guarantor who have been granted a moratorium and the others who have not approached the National Company Law Tribunal, as the word "debt", as used in section 96 of the National Company Law Tribunal, has to be held to be the "debt", in its entirety and not otherwise. (Emphasis supplied) 12. It is also necessary to note that there is no provision in the Arbitration and Conciliation Act, 1996 for splitting up of arbitration proceedings, by concei....
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....e of fundamental policy of Indian law and are liable to be set aside under Section 34(2)(b)(ii) of Arbitration Act. 47. The other ground on which the impugned Awards cannot be sustained is the violation of principles of natural justice by refusing the Petitioners the right to cross examine the Bank's witness. 48. The Bank led the evidence of its witness by filing Affidavit of Evidence and application came to be filed by the Petitioners seeking permission to cross examine the witness. The Learned Arbitrator has gone into the sufficiency of reasons for cross examination to reject the application and has held that the burden is upon the Petitioners to prove the defence. 49. Section 18 of Arbitration Act provides that the parties shall be treated with equality and each party shall be given a full opportunity to present his case. Section 24 of Arbitration Act provides that in absence of an agreement between the parties, the arbitral tribunal shall decide whether to hold oral hearings for the presentation of evidence or for oral argument or whether the proceedings shall be conducted on the basis of documents and other materials. The proviso to Section 24(1) of the Arbitration Ac....
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.... with the signatures on the documents shows that the documents were executed by the Petitioners and (c) the contents of the documents show due execution by the Petitioners. 54. The finding of proof of claim was interlinked with the proof of execution of the documents by the Petitioners. Mr. Totala has submitted that the original documents were not even produced on record, which has not been disputed by Mr. Punalekar. It is evident that the execution of documents by the Petitioners was contested fact which required oral evidence and the Petitioner's request for cross examination of the witness was reasonable. The Learned Arbitrator while rejecting the application has held that the Petitioners are required to prove their defence. One of methods of proof of the defence is cross-examination of the Banks' witness. 55. The Hon'ble Apex Court in the case of M/s. Narinder Singh and Sons vs. Union of India (supra), has held that the lack of full opportunity as envisaged by Section 18 of the Act impedes a fair and just decision and had consequently set aside the Award in terms of clause (iii) to Section 34(2)(a) as well as clause (ii) to Section 34(2)(b) of Arbitration Act. 56. Unde....
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....l instrument and it is not the contention that such liberty has not been availed. 61. An inquiry into the insufficiency of the stamps on the documents would entail an inquiry into the issue as to which is the principal document and whether the same has been duly stamped, which enters into the realm of fact finding inquiry. Such an inquiry not conducted before the Learned Arbitrator cannot be permitted to be conducted under Section 34 of Arbitration Act. 62. The objection to jurisdiction was premised on the ground that the Petitioners are not members of the Respondent No. 1-Bank. The learned Arbitrator has considered the affidavit of evidence filed by the Respondent No. 1-Bank to hold that the Petitioners have become members of the Disputant-Bank as the relevant application forms for the membership of the Disputant Bank duly signed by the Petitioners along with the personal information are placed on record. The Learned Arbitrator is the master of the quality and quantity of evidence and this Court cannot go into the adequacy of the evidence or re-appreciate the findings to substitute its own view. The Bank has placed documentary evidence on record which has been considered by ....