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Judgment
Anoop V. Mohta, J.—The Petitioner has challenged an Award dated 13 August 2008 arising out of a dispute u/s 84 of the Multi State Cooperative Societies Act, 2002 (MSCS Act).
The original claimant/Bank (Respondent No. 1) claimed the amount of Rs. 54,298/with future interest from the Petitioner and Respondents 2 to 4. As per Respondent No. 1/Bank, Respondent No. 2 is the principal borrower. Respondents 3 and 4 and the Petitioner are the guarantors. Before the Arbitrator, though served, Respondents 2 and 3 were absent. By the impugned Award, the Arbitrator has fastened the liability against all original Respondents 1 to 4 with interest from the date of institution of claim i.e. 2/12/2006.
The Petitioner (original Respondent No. 4), only, has preferred this Petition u/s 34 of the Arbitration and Conciliation Act, 1996 ( for short, "the Act").
In the year 1999 one Cooperative Bank of Ahmedabad Limited approached to the Petitioner''s firm/company called "Laxmi Auto Plaza Limited" for the purposes of providing loan to various purchasers of auto rickshaws on the reasonable terms and conditions. The Petitioner, therefore, recommended to various purchasers of the auto rickshaws to the said Bank. Respondent No. 2 was the original borrower. Respondents 3 and 4 are guarantors. The Petitioner has also been treated as guarantor though as he has signed the recommendatory document. Admittedly, the said Bank merged in the Bank of claimant/Respondent No. 1.
The point of bar of limitation as raised by the learned Counsel appearing for the Petitioner, in the present facts and circumstances of the case, in my view goes to the root of the matter. The loan was obtained from the earlier Bank on 5.5.1999. There is no serious dispute that Respondents 2, 3 and 4 are the members of the said Bank. There is no material to justify the claim of Respondent No. 1/Bank that the Petitioner, who recommended the various purchasers of the auto rickshaws to get the loan from the said Bank was also member of the Bank. The signature on the recommendation letter in my view cannot be treated as a guarantee letter for the purposes of recovery of the unpaid amount.
Admittedly, the principal borrower and the guarantor''s never contested the proceedings before the Arbitrator. The contest was only by Respondent No. 4 and the Petitioner. The Award, therefore, so far as other Respondents are concerned, as passed remained intact.
Section 85 of the MSCS Act provides that a limitation continue till members cease from the membership of the Bank. The loan, as recorded, was obtained on 05.05.1999. The claim petition was filed on 02.12.2006 by the present Bank. There is nothing to show that the membership of the Petitioner was valid and recognised member of the earlier Bank as well as the present one. Mere observation that Respondents 2 to 4 (including the Petitioner) stood as guarantor for the said loan and they are members of the earlier Bank that itself is sufficient to bring the present claim within the limitation by treating that they are still members of the present Bank.
The Petitioner has raised specific objection even before the Arbitrator about the enforceable contract and of any membership of the Bank. Mere recommendation made by the Petitioner cannot be treated as a guarantor. The Petitioner was only vendor of the auto rickshaw who recommended the cases for the loan in question and of large number of such purchasers of the vehicle/auto rickshaw. In view of this specific objection, there was no material brought on record by the present Bank/Respondent No. 1 to justify their case/claim against the vendor of vehicle also by treating him as a valid member of the Bank. Respondent No. 1/Bank''s claim after sanction of scheme of merger on 11 May 2006 therefore cannot be treated as a fresh cause of action for filing or taking legal proceedings of recovery of unpaid loan of the year 1999 against the nonmember like the Petitioner. Therefore, on the date of the filing of the claim itself it was barred by limitation.
Therefore, taking overall view of the matter, without going further into the reasoning on merit given by the Arbitrator, I am of the view that in the present facts and circumstances of the case, the claim so filed itself was beyond limitation. In the result, the Award so granted against the Petitioner therefore is quashed and set aside.
As there is no challenge raised or made by the other Respondents and as the Award can be modified, I am inclined to set aside the Award and/or liability with respect to Petitioner only. Respondent No. 1/Bank is free to take steps for enforcement of Award against the other original Respondents in accordance with law.
In the result, the present Petition is allowed in terms of prayer (a) in respect of the Petitioner only. The Award is accordingly set aside and modified only with respect to the Petitioner. There shall be no order as to costs.