National Cooperative Consumers Federation of India Ltd. vs . Kerala State Cooperative Consumers Federation Ltd. and Another

S. Muralidhar, J.

IA No. 5600/2006 (for condonation of delay)

For the reasons stated therein, the application is allowed and delay in filing the objections stands condoned.

The application stands disposed of.

OMP No. 219 of 2006

The National Co-operative Consumers'' Federation of India Ltd. (''NCCF'') has, in this petition u/s 34 of the Arbitration and Conciliation Act, 1996 (''Act'') challenged the impugned Award dated 12th January 2006 rendered by the sole Arbitrator (Respondent No. 2) to the extent that the claim of the Petitioner against the Kerala State Cooperative Consumers Federation Ltd. Respondent No. 1 (''KSCCF'') pertaining to the period from 1981 to 1985 was rejected as being barred by limitation. The Petitioner NCCF is a national level Consumers Cooperative Society registered under the Multi-State Co-operative Societies Act, 2002 (''MSCS Act'') dealing in the sale and purchase of the consumer goods like groceries, general merchandise, controlled doth and other commodities. Respondent No. 1 is admittedly a member of the Petitioner. According to the Petitioner, it sold several items of groceries, general merchandise, controlled clothes and other commodities to KSCCF and was maintaining its accounts in the regular course of its business. A legal notice was issued on 10th January 2001 by the Petitioner to KSCFF claiming some outstanding amounts. Along with its letters dated 27th August 2001 and 12th September 2001 the Petitioner enclosed a summarized statement showing the outstanding as on 31st March 2001. In its reply dated 17th November 2001, KSCCF informed the Petitioner that as per its accounts the balance as on 31st March 1999 was Rs. 9.89 lakhs. After adjusting the sum of Rs. 1 lakh which was paid on 23rd June 1999, the balance got reduced to Rs. 8.89 lakhs. The letter referred to a reconciliation carried out as on 30th June 1988 in terms of which the difference between the figures of NCCF and KSCCF was in the sum of Rs. 11,41,996.50. However, as per the NCCF the difference was to the tune of Rs. 20.29 lakhs. It was stated in the said letter thereafter as under:-

It was agreed upon at the time of discussions with the Managing Directors of the two Federations on 24/05/1988 that the unreconciled and the disputed amount will be kept apart of the other balances till it is reconciled and dispute settled. I would like to state that the dispute still exists and not settled so far.

In response to the above letter the Petitioner on 24th January 2002 requested Respondent No. 1 to settle the dues to the extent of Rs. 8.89 lakhs which was accepted by it pending reconciliation of accounts of disputed entries concerning free delivery of controlled doth and other items. The disputes between the parties were thereafter referred to sole arbitration.

It appears that a preliminary objection was raised by KSCCF as to the jurisdiction of the sole Arbitrator to adjudicate the disputes. By an order dated 4th March 2005 the learned Arbitrator negatived the said objection and held that he had jurisdiction to hear and decide the dispute between the Petitioner and Respondent No. 1. The Petitioner filed a claim in the sum of Rs. 28,01,279.13 plus interest due thereon @ 18.25% per annum against Respondent No. 1 before the learned Arbitrator. Inter alia, it was contended by Respondent No. 1 that the claim of the Petitioner pertained to supplies made during the period from 1981 to 1985 and therefore, the said claim was barred by limitation.

A perusal of the impugned Award shows that the learned Arbitrator did not frame a specific issue as regards a part of the claim of the Petitioner being barred by limitation. However, in paras 11 and 12 of the impugned Award the learned Arbitrator held as under: -

From the documents and statement of accounts filed by the Claimants along with the statement of claims it is correct that the aforesaid sum of Rs. 28,01,279.13 pertained to the period from 1981 to 1985. No doubt, the Claimants have sent the reconciliation statement to the Respondents as on 31st March 2001.

According to the provisions of the Limitation Act 1963, the period of limitation is three years in alt suits relating to contract. Therefore, irrespective of the Article of the Limitation Act, 1963 in which this case might fall, the limitation is three years. Since the claim pertains to the period from 1981 to 1985, it is barred by limitation.

Consequently, the learned Arbitrator proceeded to award the Petitioner only Rs. 8.89 lakhs, which was the sum admitted by KSCCF, together with interest at 10% per annum from the date of filing of the claim till the date of payment.

This Court has heard the submissions of Mr. J.P. Sengh, learned Senior counsel appearing for the Petitioner NCCF and Mr. A.P. Mukundan, learned counsel appearing for Respondent No. 1 KSCCF.

The impugned Award does not discuss the portion of the letter dated 17th November 2001 which has been extracted hereinbefore, which deals with the claims in relation to the period between 1981 to 1985. Although KSCCF admitted that it owed the Petitioner a sum of Rs. 8.89 lakhs as per its accounts as being balance as on 31st March 1991, as regards the disputed amounts it stated that those had to be kept apart "till it is reconciled and dispute settled". This should be taken as the repudiation by KSCCF of the Petitioner''s claim for the said amount and an acknowledgment that the dispute in that regard had stilt not been settled.

Sections 84 and 85 of the MSCS Act, 2002 are in the nature of an exception to the general rule of limitation under the Limitation Act, 1963 insofar as it concerns certain types of disputes involving a multi-State co-operative society and its member. The said provisions read as under:-

Reference of disputes - (1) Notwithstanding anything contained in any other law for the time being in force, if any dispute [other than a dispute regarding disciplinary action taken by a multi-State 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 members 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.

(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 cooperative 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.

(5) Save as otherwise provided under this Act, the provisions of the Arbitration and Conciliation Act, 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.

Limitation. - (1) Notwithstanding anything contained in the Limitation Act, 1963 (36 of 1963), but subject to the specific provisions made in this Act, the period of limitation in the case of a dispute referred to arbitration shall,--

(a) when the dispute relates to the recovery of any sum including interest thereon due to a multi-State co-operative society by a member thereof, be computed from the date on which such member dies or ceases to be a member of the society;

(b) save as otherwise provided in clause (c), when the dispute relates to any act or omission on the part of any of the parties referred to in clause (b) or clause (c) or clause (d) of sub-section (1) of section 84, be six years from the date on which the act or omission, with reference to which the dispute arose, took place;

(c) when the dispute is in respect of an election of an officer of a multi-State cooperative society, be one month from the date of the declaration of the result of the election.

(2) The period of limitation in the case of any dispute, except those mentioned in sub-section (1), which are required to be referred to arbitration shall be regulated by the provisions of the Limitation Act, 1963(36 of 1963), as if the dispute were a suit and the arbitrator a civil court.

(3) Notwithstanding anything contained in sub-sections (1) and (2), the arbitrator may admit a dispute after the expiry of the period of limitation, if the applicant satisfies the arbitrator that he had sufficient cause for not referring the dispute within such period.

Section 85(1) (b) of the MSCS Act prescribes a limitation of six years "from the date on which the act or omission, with reference to which the dispute" as mentioned in Section 84(1) (b), (c) or (d) took place. Section 84(1) of the MSCS Act talks of disputes "touching the constitution, management or business of a multi-State co-operative society". These disputes have been further described u/s 84(1) to 84(1) (d) of the MSCS Act. In order to understand what is deemed to be a dispute "touching the constitution, management or business of a multi-State co-operative society", a reference has been made to Section 84(2). For the purposes of present case, u/s 84(2) (c) of the MSCS Act a claim by the multi-State co-operative society, i.e., NCCF for any debt or demand due to it from a member, in this case, the KSCCF, would be deemed to be a dispute touching the constitution, management or business of a multi-State co-operative society and, therefore covered u/s 84(i)(b) of the MSCS Act. In terms of Section 85(1) (b), the limitation for such a dispute would be six years from the date on which the act or omission took place.

The learned Arbitrator, apart from not noticing the relevant portion of the letter dated 17th November 2001 and its effect on the claim of the Petitioner, also failed to notice the above provisions of the MSCS Act which are in the nature of an exception to the Limitation Act in relation to such claims by a multi-State co-operative society against its member. In fact. Section 85(2) states that for all other kinds of disputes, i.e., those not covered by Section 85(1) of the MSCS Act, they would be regulated by the provisions of the Limitation Act, 1963, as if the dispute were a suit and the arbitrator a civil court. Further, u/s 85(3) the arbitrator can entertain a dispute even after the expiry of the period of limitation, if the applicant satisfies the arbitrator that there is a sufficient cause for not referring the dispute within such period. The above provisions have obviously not been considered by the learned Arbitrator at all.

With KSCCF acknowledging that the disputes in relation to the amounts against such supplies were still subsisting as on 17th November 2001, and with the Petitioner having invoked the arbitration clause on 28th March 2004, the Petitioner''s claim was still within the period of limitation of six years as provided by Section 85(1) (b) read with Section 84(1) (b) and 84(2) of the MSCS Act. In any event, it was also within the limitation period of three years as provided by the limitation Act, 1963. Consequently, the impugned Award to the extent it holds that the claims of the Petitioner pertaining to the period 1981 to 1965 are barred by limitation, is unsustainable in law, and is hereby set aside.

The other ground raised by the Petitioner is that while in para 16 of the impugned Award, the (earned Arbitrator awarded interest at 10% per annum from the date of the filing of the statement of claims, i.e., 25th March 2004 till the date of payment, in the operative portion in para 18 a direction has been issued that Respondent No. 1 will pay interest at 10% per annum on the sum of Rs. 8,89,000 from 25th March 2004 till the date of the Award.

There is merit in the above contention. When one compares paras 16 and 18 of the impugned Award, clearly the learned Arbitrator had awarded interest till the date of payment on the sum of Rs. 8.89 lakhs, for some inexplicable reason in para 18 he has restricted the interest only till the date of the Award. Clearly this is an error apparent on the face of the Award and requires correction. The operative portion of the impugned Award in para 18 is modified by directing that KSCCF will pay the Petitioner interest at 10% per annum on the sum of Rs. 8.89 lakhs from 25th March 2004 till the date of payment.

Consequently, while setting aside a portion of the impugned Award to the extent indicated in para 12 above and modifying that portion relating to interest as indicated in para 14 above, this Court remands to the learned Arbitrator the claims of the Petitioner pertaining to the period from 1981 to 1985 for a fresh determination. If for some reason the same sole Arbitrator is not available or is unable to decide the disputes afresh, then the Central Registrar, Multi-State Cooperative Societies will in exercise of the powers u/s 84 of the MSCS Act refer the above claims of the Petitioner pertaining to the supplies made between 1981 and 1985 to another sole Arbitrator who will decide it afresh on merits. The Central Registrar will intimate the parties of such appointment within a period of four weeks from today. The learned Arbitrator is requested to decide the above claims of the Petitioner on merits within a period of six months from the date of the first sitting pursuant to this order. The petition is disposed of in the above terms with no order as to costs.