The Bombay High Court has set aside an arbitral award directing respondents to pay ₹18.16 lakh to Apna Sahakari Bank Ltd., holding that the award suffered from breach of natural justice and patent illegality.
Justice Aarti Sathe was hearing a petition under Section 34 of the Arbitration and Conciliation Act, challenging an award dated March 6, 2024, passed under the Maharashtra Co-operative Societies Act. The dispute arose from a housing loan of ₹7.70 lakh availed by the petitioner in 2006. He claimed that he had repaid the loan in 2023, but the Bank did not return his title documents. He later learnt that the Bank was treating him as a co-borrower/surety in connection with a separate cash-credit facility availed by another respondent.
He disputed the documents relied upon by the Bank, alleging that his signatures and the Bank’s seal had been forged. He also denied having stood as a surety or having mortgaged his flat for the separate facility. However, the arbitral tribunal decided against him leading to the present appeal.
The High Court found that although notices had been issued, the Arbitrator proceeded without giving the petitioner an effective opportunity to present his case. The Court observed:
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“The impugned arbitral award therefore suffers from a breach of the principles of natural justice, inasmuch as though a notice was issued to the Petitioner, however, the Petitioner was not heard, which by itself makes the impugned arbitral award an award which is in breach of the principles of natural justice.
The Court further noted that the award did not adequately explain how the petitioner’s flat became security for the cash-credit facility or whether the documents relied upon by the Bank actually bore his signatures.
The Court identified several material questions that had not been decided by the Arbitrator, including whether the petitioner was a member of the Bank, whether he had applied for membership, whether he was a co-borrower in the CC/111 account, whether his flat had actually been mortgaged for that facility, and whether the signatures on the relevant documents were genuine. The Court held:
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“Considering the aforesaid settled principles of law and the facts of the present case, since the impugned arbitral award has not rendered any finding on inter-alia the following important issues, the same suffers from the vice of patent illegality and is liable to be set aside.”
The Court consequently set aside the arbitral award. It directed that any amount deposited in Court be released within one month from the date of uploading of the judgment and permitted the parties to initiate fresh arbitration proceedings in accordance with law.
