Mrs. Anitha Jesuman Vs the Central Arecanut and Cocoa — Arbitration | Karnataka HC (2025)

Mrs. Anitha Jesuman Vs the Central Arecanut and Cocoa — Arbitration | Karnataka HC (2025)

What the court decided

AI extract

Outcome

No relief granted; writ petition dismissed, with the observation that all contentions are kept open to be urged before the Arbitrator.

Issue for consideration

Whether the writ petition under Articles 226 and 227 is maintainable against an interlocutory order (rejection of I.A.No.V) passed by the Arbitrator during pending arbitration proceedings under Section 84 of the MSCS Act, given the remedies available under the Arbitration and Conciliation Act, 1996. +1 more

Court's answer

All disputes under Section 84 of the MSCS Act are referred to the Arbitrator and partake the nature of arbitration proceedings under the Arbitration and Conciliation Act, 1996.

Ratio / Principle

It is no more res integra that orders passed by the Arbitrator or the Arbitral Tribunal during the course of arbitration proceedings cannot be interfered with by the High Court; the aggrieved party has to wait until the award is made by the Tribunal/Arbitrator.

Key takeaways

The writ petition is dismissed as devoid of merits.ratio¶17
It is needless to observe that all contentions are kept open to be urged before the Arbitrator (including the petitioner's jurisdictional objection under issue 2, which was not decided).obiter¶17

Detailed headnote1 paragraphs

Writ Petition (CS-RES) under Articles 226 & 227 — maintainability — challenge to interlocutory order of Arbitrator under Section 84 of the Multi State Co-operative Societies Act, 2002 — petitioner's I.A.No.V under Order VII Rule 11(d) CPC r/w Section 84 of the Act, seeking rejection of CAMPCO's claim plaint (arising out of her dismissal from service with direction to make good Rs.1,08,74,286/- to the Society), was rejected by respondent No.2-Arbitrator on 13.12.2024 with cost of Rs.2,500/- — held: proceedings under Section 84 of the MSCS Act partake the nature of arbitration proceedings under the Arbitration and Conciliation Act, 1996; once arbitration has commenced, the High Court will not interfere with orders passed by the Arbitrator/Arbitral Tribunal during its course; the aggrieved party has to wait until the award is made, remedies lying under Section 37 (appeal) or Section 34 (challenge to the award) of the 1996 Act — reliance placed on SBP & Co. v. Patel Engineering Ltd., (2005) 8 SCC 618; P.C.Babu v. Sandeep B, 2018 SCC Online KAR 2151; K. Satish Kumar v. Rohan Associates (WP No.37175/2013, DD 23.01.2014); and The General Insurance Credit Company Ltd. v. Registrar of Co-operative Societies (WP No.4742/2024, DD 16.08.2022) — writ petition dismissed as devoid of merits; all contentions kept open to be urged before the Arbitrator. (Single Judge, oral order, paras 9–17; operative Order I & II.)

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

DATED THIS THE 19^TH DAY OF FEBRUARY, 2025

BEFORE

THE HON'BLE MRS JUSTICE K.S. HEMALEKHA WRIT PETITION NO. 4839 OF 2025 (CS-RES)

BETWEEN:

MRS. ANITHA JESUMAN W/O ANAND, AGED ABOUT 59 YEARS R/AT VISHAL VILLA KARKERA COMPOUND, BOLAR, MANGALORE - 575 001.

…PETITIONER

(BY SRI. SACHIN B.S., ADVOCATE)

AND:

THE CENTRAL ARECANUT AND COCOA MARKETING AND PROCESSING CO-OPERATIVE LIMITED, (CAMPCO) A MULTI STATE CO-OPERATIVE SOCIETY, HAVING ITS REGISTERED OFFICE SITUATED AT VARANASHI TOWERS, MISSION STREET, MANGALORE - 575 001, D.K.DISTRICT REP BY ITS MANAGING DIRECTOR

Digitally signed by MAHALAKSHMI B M Location: HIGH COURT OF KARNATAKA

THE REGISTRAR OF CO-OPERATIVE SOCIETIES, ALI ASKAR ROAD, BANGALORE REP BY HONBLE ARBITRATOR UDUPI - 576 101.

…RESPONDENTS

(BY SRI.K. RAVISHANKAR, ADVOCATE FOR C/R1)

THIS W.P. IS FILED UNDER ARTICLES 226 & 227 OF THE CONSTITUTION OF INDIA, PRAYING TO QUASH THE IMPUGNED ORDER DTD. 13.12.2024 IN NO. CAMPCO/ARB/01/2024-25 PASSED ON I.A.NO.V AS PER ANNX-A ISSUED BY R-2 AND ALLOW THE I.A.NO.V AS PRAYED FOR IN THE INTEREST OF JUSTICE AND EQUITY.

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THIS PETITION, COMING ON FOR FRESH MATTERS, THIS DAY, ORDER WAS MADE THEREIN AS UNDER:

CORAM: HON'BLE MRS JUSTICE K.S. HEMALEKHA

ORAL ORDER

The petitioner has called in question the order dated 13.12.2024 passed on IA.No.V by respondent No.2-Arbitrator, by the impugned order, the application-IA.No.V filed by the petitioner under Order VII Rule 11(d) of CPC read with Section 84 of the Multi State Co-operative Societies Act, 2002 ('Act' for short) was rejected with cost of Rs.2,500/-.

The petitioner was dismissed from service as per resolution dated 04.03.2024 and order dated 06.03.2024, with an order to make good loss to the Society to a tune of Rs.1,08,74,286/-. The claim petition was filed by respondent No.1 invoking the provisions of the Act, by an order dated 07.08.2024, respondent No.2 under Section 84 (1) of the Act, appointed the Arbitrator to decide the claim filed by the Society.

The petitioner filed an application-I.A.No.V under Order VII Rule 11(d) of CPC read with Section 84 of the Act seeking rejection of the plaint on the ground that the claim of

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respondent No.1-Society is without any jurisdiction. Respondent No.2 - Arbitrator by the impugned order rejected the application-I.A.No.V filed by the petitioner with cost of Rs.2,500/-.

When the matter stood thus, the petitioner approached this Court in W.P.No.34278/2024 calling in question the order dated 07.08.2024 passed by respondent No.2-Registrar of Co-operative Societies appointing an Arbitrator to decide the claim of the Society. This Court by an order dated 25.01.2025 dismissed the writ petition. Now the present writ petition is filed challenging the order passed on I.A.No.V by the Arbitrator on 13.12.2024.

Heard the learned counsel appearing for the petitioner and the learned counsel appearing for the respondent No.1-Society and the learned AGA for respondent No.2.

Learned counsel for the petitioner taking this Court

to Section 84 of the Act, submits that in terms of Section 84, there is an exception that disputes cannot be raised with regard to the disciplinary action taken by the Society against its paid employee. It is submitted that the impugned order passed by

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respondent No.2 invoking Section 84 of the Act appointing the Arbitrator to decide the claim made by the Society is without jurisdiction.

Per contra , learned counsel appearing for respondent No.1 drawing the attention of this Court to Section 84 of the Act and the Arbitration and Conciliation Act, 1996, (‘Arbitration Act’ for short), submits that the arbitration proceedings is pending before the Arbitrator, the impugned order is an interlocutory order, the order on interlocutory order passed by the Arbitrator cannot be called in question and the said proposition is well settled in light of the decision of the Apex Court in the case of SBP & Co., vs. Patel Engineering Ltd., and another¹ (SBP & Co.,) and the latest decision of the Apex Court in the case of P.C.Babu vs. Sandeep B and others² ( P.C.Babu).

Before adverting to the rival contentions, it is necessary to refer Section 84 of the Act, which reads as under:

"84. Reference of disputes.—

(1) Notwithstanding anything contained in any other law for the time being in force, if any dispute other than a

1 (2005) 8 SCC 618

2 2018 SCC Online KAR 2151

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dispute regarding disciplinary action taken by a MultiState Co-operative Society against its paid employee or an industrial dispute as defined in clause (k) of Section 2 of the Industrial Disputes Act, 1947 (14 of 1947) touching the constitution, management or business of a Multi-State Co-operative Society arises—

(a) among members, past members and persons claiming through members, past members and deceased members, or

(b) between a member, past member 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 present, 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 employee 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 Co-Operative Society and liquidator of another Multi-State Co-Operative Society or between the liquidator of one Multi-State Co-Operative Society and the liquidator of another Multi-State Co-Operative Society, such dispute shall be referred to arbitration.

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(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 the Multi-State Co-Operative Society for any debt or demand due to it from a member or the nominee, heirs or legal representatives of a deceased member, whether such debt or demand be admitted or not;

(b) a claim by a surety against the principal debtor where the Multi-State Co-Operative Society has recovered from the surety any amount in respect of any debt or demand due to it from the principal debtor as a result of the default of the principal debtor, whether such debt or demand is admitted or not;

(c) any dispute arising in connection with the election of any officer of a Multi-State Co-Operative Society.

(3) If any question arises whether a dispute referred to arbitration under this section is or is not a dispute touching the constitution, management or business of a Multi-State Co-Operative Society, the decision thereon of the arbitrator shall be final and shall not be called in question in any court.

(4) Where a dispute has been referred to arbitration under sub-section (1), the same shall be settled or decided by the arbitrator to be appointed by the Central Registrar.

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(5) Save as otherwise provided under this Act, the provisions of the Arbitration and Conciliation Act, 1996 (26 of 1996) shall apply to all arbitration under this Act as if the proceedings for arbitration were referred for settlement or decision under the provisions of the Arbitration and Conciliation Act, 1996".

A plain reading of the aforesaid provisions clearly indicates that all disputes under Section 84 would be referred to the Arbitrator and the same would par take the nature of the Arbitration proceedings under the Act of 1996. The Co-Ordinate Bench of this Court in the case of The General Insurance Credit Company Limited Vs. The Registrar of Co-Operative Society³ (The General Insurance Credit

Company Limited) held at paragraph No.5 as under:

"5. A plain reading of the aforesaid provisions will clearly indicate that all disputes under Section 84 of the MSCS Act will get referred to Arbitration and the same would partake the nature of arbitration proceedings under the said Act of 1996. In other words, all proceedings under Section 84 of the MSCS Act are nothing but arbitration proceedings governed by the provisions of the said Act of 1996. A conspectus of the provisions of Section 84 r/w Rule 30 of the MSCS Act and Rules and the provisions of the said Act of 1996 will lead to the following conclusions:-

3 WP No.4742/2024. D.D 16.08.2022.

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(i) Interim orders passed by the Arbitrator/Registrar of Co-operative Societies in proceedings under Section 84 of the MSCS Act which are appealable would have to be challenged by way of an appeal permissible under Section 37 of the said Act of 1996.

(ii) Interim orders which are not appealable under the said Act of 1996 would necessarily have to be challenged- 8 -the arbitral award under Section 34 of the said Act of 1996.

(iii) Final orders / arbitral awards passed in proceedings under Section 84 of the MSCS Act would also necessarily have to be challenged only under Section 34 of the said Act of 1996."

10. The Apex Court in the case of SBP & Co., stated supra held at para Nos.45 to 47 as under:

“ 45. It is seen that some High Courts have proceeded on the basis that any order passed by an Arbitral Tribunal during arbitration, would be capable of being challenged under Article 226 or 227 of the Constitution. We see no warrant for such an approach. Section 37 makes certain orders of the Arbitral Tribunal appealable. Under Section 34, the aggrieved Party has an avenue for ventilating its grievances against the award including any inbetween orders that might have been passed by the Arbitral Tribunal acting under Section 16 of the Act. The Party aggrieved by any order of the

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Arbitral Tribunal, unless has a right of appeal under Section 37 of the Act, has to wait until the award is passed by the Tribunal. This appears to be the scheme of the Act. The Arbitral Tribunal is, after all, a creature of a contract between the Parties, the arbitration agreement, even though, if the occasion arises, the Chief Justice may constitute it based on the contract between the Parties. But that would not alter the status of the Arbitral Tribunal. It will still be a forum chosen by the Parties by agreement. We, therefore, disapprove of the stand adopted by some of the High Courts that any order passed the Arbitral Tribunal is capable of being corrected by the High Court under Article 226 or 227 of the Constitution. Such an intervention by the High Courts is not permissible.

“46. The object of minimizing judicial intervention while the matter is in the process of being arbitrated upon, will certainly be defeated if the High Court could be approached under Article 227 or under Article 226 of the Constitution against every order made by the Arbitral Tribunal. Therefore, it is necessary to indicate that once the arbitration has commenced in the Arbitral Tribunal, Parties have to wait until the award is pronounced unless, of course, a right of appeal is available to them under Section 37 of the Act even at an earlier stage.

“47. We, therefore, sum up our conclusions as follows:

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(i) to (v) xxxxxxxxxxx

(vi) Once the matter reaches the Arbitral Tribunal or the sole arbitrator, the High Court would not interfere with the orders passed by the arbitrator or the Arbitral Tribunal during the course of the arbitration proceedings and the Parties could approach the Court only in terms of Section 37 of the Act or in terms of Section 34 of the Act.”

The Apex Court in the case of SBP & Co., stated

supra has held that the party aggrieved by an order of Arbitral Tribunal has to wait until the award is made by the Tribunal. The Apex Court in clear terms held that, once the matter reaches the Arbitral Tribunal, the High Court could not interfere with the orders passé by the arbitrator or the arbitral tribunal during the course of the arbitration proceedings.

It is observed by the Apex Court that the object of minimizing judicial intervention while the matter is in the process of being arbitrated upon will certainly be defeated if the High Court could be approached under Articles 226 or 227 of the Constitution against every order made by the Arbitral Tribunal and it was observed that once the arbitration has commenced in the Arbitral Tribunal, parties have to wait until

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the award is pronounced, unless, of course a right of appeal is available to them under Section 37 of the Arbitration Act, 1996 even at an earlier stage.

In the given note in the proceedings before respondent No.2, petitioner has filed objections and I.A.No.V was contested. The application has been rejected and the matter is pending before the Arbitrator. The petitioner having participated in the proceedings and now at this stage wants to contend that the petition/claim made by the Society before the arbitrator is not maintainable.

The Co-Ordinate Bench of this Court in the case of P.C.Babu stated supra while dealing with the petition challenging the order passed by the Arbitrator has held at paragraph No.5, 6, 7, 8 and 9 as under:

" 5. It is noted that the first respondent herein has exercised jurisdiction as an arbitrator in respect of the claim made by the third respondent having regard to Section 84 of the Multi-State Co-operative Societies Act, 2002, which is applicable in the present case. Subsection (5) of Section 84 reads as under:

"84. Reference of disputes .- (5) Save as otherwise provided under this Act, the provisions of the Arbitration and Conciliation Act, 1996 (26 of 1996) shall apply to all arbitration under this Act as if the

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proceedings for arbitration were referred for settlement or decision under the provisions of the Arbitration and Conciliation Act, 1996."

6. Therefore, the arbitration proceedings under the provisions of the aforesaid Act are subject to Arbitration and Conciliation Act, 1996. Under Section 17 of the Arbitration and Conciliation Act, 1996, the arbitrator has the jurisdiction to pass interim measures of protection as may appear to the arbitrator just and convenient [Section 17(1)(ii)(e)). If any person is aggrieved by any interim order passed by the Arbitral Tribunal, the remedy lies under Section 37(2) of the Arbitration and Conciliation Act, 1996. The remedy is by way of an appeal to a Court from an order of the Arbitral Tribunal granting or refusing to grant an interim measure under Section 17. Therefore, the petitioner herein has an alternative and efficacious remedy of an appeal under Section 17(2) of the Arbitration and Conciliation Act, 1996. In the circumstances, the writ petition is dismissed as not maintainable.

7. In this regard reliance is placed on a decision of the Hon'ble Supreme Court in the case of SBP & Company v. Pate I Engineering Limited [(2005) 8 SCC 618], wherein at Paragraph Nos. 45, 46 and 47, it has been observed as under:

"45. It is seen that some High Courts have proceeded on the basis that any order passed by an Arbitral Tribunal during arbitration, would be capable of being challenged under Article 226 or 227 of the Constitution. We see no warrant for such an approach.

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Section 37 makes certain orders of the Arbitral Tribunal appealable. Under Section 34, the aggrieved Party has an avenue for ventilating its grievances against the award including any in-between orders that might have been passed by the Arbitral Tribunal acting under Section 16 of the Act. The Party aggrieved by any order of the Arbitral Tribunal, unless has a right of appeal under Section 37 of the Act, has-to-wait until the award is passed by the Tribunal. This appears to be the scheme of the Act. The Arbitral Tribunal is, after all, a creature of a contract-between the Parties, the arbitration agreement, even though, if the occasion arises, the Chief Justice may constitute it based on the contract between the Parties. But that would not alter the status of the Arbitral Tribunal. It will still be a forum chosen by the Parties by agreement. We, therefore, disapprove of the stand adopted by some of the High Courts that any order passed the Arbitral Tribunal is capable of being corrected by the High Court under Article 226 or 227 of the Constitution. Such an intervention by the High Courts is not permissible.

"46. The object of minimizing judicial intervention while the matter is in the process of being arbitrated upon, will certainly be defeated if the High Court could be approached under Article 227 or under Article 226 of the Constitution against every order made by the Arbitral Tribunal. Therefore, it is necessary to indicate that once the arbitration has commenced in the Arbitral Tribunal, Parties have to wait until the award is pronounced unless, of course, a right of appeal-is available to them under Section 37 of the Act even at an earlier stage.

"47. We, therefore, sum up our conclusions as follows:

(i) to (v) xxxxxXXXXXX

(vi) Once the matter reaches the Arbitral Tribunal or the sole arbitrator, the High Court would not interfere with the orders passed by the arbitrator or the Arbitral Tribunal during the course of the arbitration proceedings and the Parties could approach the Court only in terms of Section 37 of the Act or in terms of Section 34 of the Act."

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8. The Hon'ble Supreme Court has strongly disapproved intervention of the Huh Court? by exercising jurisdiction under Article 226 and 227 of the Constitution of India by entertaining writ petitions filed against interim orders passed by the Arbitral Tribunal.

9. Further, this Court, in the case of K. Satish Kumar v. Rohan Associates (W.P. No. 37175/2013 disposed on 23/01/2014) by following the dictum of the Hon'ble Supreme Court, has dismissed the writ petition assailing the order passed by an Arbitrator on the ground of maintainability. The said order is also squarely applicable to the present case, In the circumstances, writ petition is dismissed as not maintainable reserving liberty to the petitioner herein to avail the alternative and efficacious statutory remedy, if so advised."

(Emphasis supplied)

The Division Bench of this Court in case of

K. Satish Kumar Vs. Rohan Associates⁴ (K. Satish Kumar)

observed that there is no manner of doubt that the High Courts are ordained not to exercise their power under Article 226 and 227 of the Constitution of India, since the party aggrieved by an order of Arbitral Tribunal has to wait until the award is made by the Tribunal. There is clear injunction by the Apex Court in

4 WP No.37175/2013. D.D 23.01.2014.

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para No.47 (vi) in SBP & Co., stated supra of the judgment that, once the matter reaches the Arbitral Tribunal, the High Court would not interfere with the orders passed by the Arbitrator or the Arbitral Tribunal during the course of arbitration proceedings.

Therefore, in light of the constitutional mandate and clear directions / injunction issued by the Apex Court in SBP & Co., stated supra , by the Division Bench of this Court of K. Satish Kumar stated supra , and the Co-Ordinate Bench of this Court in the case of P.C.Babu and The General Insurance Employees Credit Society Limited stated supra ,

it is no more res integra that the orders passed by the Arbitrator or the Arbitral Tribunal during the course of arbitration proceedings cannot be interfered by the High Court and the aggrieved party has to wait until the award is made by the Tribunal / Arbitrator.

For the foregoing reasons, this Court pass the

following:

ORDER

I. Writ petition is dismissed as devoid of merits.

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II. It is needless to observe that all contentions are kept

open to be urged before the Arbitrator.

Sd/-

JUSTICE K.S. HEMALEKHA

PSG List No.: 1 Sl No.: 7