Delhi High Court: Notice Under Section 21 Of Arbitration Act Essential For Multi-State Cooperative Societies Act Proceedings

Delhi High Court: Notice Under Section 21 Of Arbitration Act Essential For Multi-State Cooperative Societies Act Proceedings

Justice Dinesh Kumar Sharma, of the Delhi High Court, has ruled that while Section 84 of the Multi-State Cooperative Societies Act, 2002 empowers the Central Registrar to appoint an arbitrator, the remaining provisions of the Arbitration and Conciliation Act, 1996 will still apply.

The court emphasized that compliance with the notice requirement under Section 21 of the Arbitration and Conciliation Act, 1996 is essential before initiating proceedings under Section 84 of the Multi-State Cooperative Societies Act, 2002.

The bench held that: “…in the absence of any specific proforma, it would be sufficient if the petitioner in case of dispute having being arisen as envisaged under Section 84 of the Multi State Cooperative Socieities Act, 2002 informs the Central Registrar for appointment of an Arbitrator and discloses the disputes.”

The petitioner, Purvanchal Hathkargha Sahakari Sangh Ltd., registered under the U.P. Co-op Society Act, 1965, has been a member of the All India Handloom Fabrics Marketing Coop. Society Ltd. for over thirty years. Alleging that Respondent No. 1 has withheld payments for supplies since 2019, the petitioner claims an outstanding amount of Rs. 1,83,32,731.22.

Upon making a representation to the Central Registrar requesting the appointment of an arbitrator under Section 84 of the Multi-State Cooperative Societies Act, the petitioner received no response. Consequently, feeling aggrieved, the petitioner approached the Delhi High Court and filed an application under Section 11(6) of the Arbitration and Conciliation Act, 1996 seeking the appointment of an arbitrator.

The High Court cited Section 84 of the Multi-State Cooperative Societies Act, 2002, emphasizing arbitration as the designated mechanism for resolving disputes concerning the management, operations, or constitution of multi-state cooperative societies. It asserted that the allegations against Respondent No. 1, involving management failures, corruption, and non-payment of dues, fell within the ambit of arbitration as stipulated in Section 84.

Referring to its decision in Appolo Handloom Manufacturing Co-op Society Ltd. v. All India Handloom Fabrics Society & Ors., the High Court underscored its authority to intervene and direct the Central Registrar to appoint an arbitrator in cases where the Registrar fails to do so.

Furthermore, the High Court stressed the imperative for the Central Registrar to appoint an arbitrator when mandated by the Multi-State Cooperative Societies Act, 2002. It emphasized that the Act explicitly grants the Central Registrar the power to appoint an arbitrator for resolving disputes related to the management and operations of cooperative societies.

In addressing the procedural concerns raised by the Respondent regarding the service of notice under Section 21 of the Arbitration Act, the High Court referred to the precedent set in Florentine Estates of India Ltd. & Anr. v. Lokesh Dahiya & Anr. The Court reiterated the importance of providing notice under Section 21 as a prerequisite for commencing arbitration proceedings. It emphasized that the provisions of the Arbitration Act, including the requirement of notice under Section 21, are applicable to arbitrations conducted under the Multi-State Cooperative Societies Act, 2002, alongside the Central Registrar's appointment power.

Highlighting the purpose of Section 21 as notifying the concerned party about the commencement of arbitration proceedings to ensure awareness of the dispute, the High Court clarified that while there is no prescribed format for such notice, any communication to the Central Registrar informing them of the dispute and requesting the appointment of an arbitrator suffices.

Furthermore, the High Court asserted that substantive issues of the dispute, such as monetary claims and alleged illegal appointments of officials, fall within the purview of the arbitrator's jurisdiction, not the court's. Consequently, the High Court directed the Central Registrar to appoint an arbitrator within three weeks and notify all parties involved.