Facts: The Petitioners, who are members of the Respondent No. 1 (a Multi-State Co-operative Bank), availed financial assistance and subsequently defaulted on repayment. Consequently, the Respondent Bank initiated statutory arbitration under Section 84 of the Multi-State Co-operative Societies Act, 2002 (MSCS Act), leading to arbitral awards in favor of the bank. Parallelly, the bank also invoked the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) for the enforcement of security interest against mortgaged properties. The Petitioners challenged the arbitral awards, primarily arguing that the Arbitrator lacked jurisdiction because recovery of debts by banking institutions is governed by central legislations like the Recovery of Debts and Bankruptcy Act, 1993 (RDB Act) and SARFAESI Act, which they claimed should exclude the application of the MSCS Act.
Procedural Posture: These are two Commercial Arbitration Petitions filed under Section 34 of the Arbitration and Conciliation Act, 1996, before the Bombay High Court, challenging the awards dated December 5, 2022, and July 3, 2023, passed by the statutory Arbitrator.
Issue: Whether the provisions of the RDB Act and SARFAESI Act exclude the jurisdiction of an Arbitrator appointed under Section 84 of the MSCS Act for the recovery of dues by a Multi-State Co-operative Bank from its members, and whether simultaneous proceedings under SARFAESI and the MSCS Act are permissible.
Holding: No, the jurisdiction of the Arbitrator under the MSCS Act is not excluded. The court held that Multi-State Co-operative Banks have the option to choose between the recovery mechanisms provided under the RDB Act and the MSCS Act, and that SARFAESI proceedings can coexist with arbitration.
Reasoning: The Court reasoned that Section 19(1A) of the RDB Act specifically grants a Multi-State Co-operative Bank the option to initiate proceedings under the MSCS Act for debt recovery instead of approaching the Debt Recovery Tribunal. The MSCS Act is a self-contained legislation with a "non obstante" clause in Section 84, giving it overriding effect in matters of disputes touching the business of the society, including debt recovery from members. Furthermore, the court clarified that SARFAESI is an enforcement process for security interests, whereas arbitration is an adjudicatory process; settled law from the Supreme Court in cases like "M.D. Frozen Foods" and "Indiabulls Housing Finance" confirms these remedies are complementary and not mutually exclusive. Finally, under Section 16 of the Arbitration and Conciliation Act, 1996, the Arbitrator is competent to rule on their own jurisdiction, which was correctly exercised here.