In the case between Kalpesh Shantikumar Mehta & Ors. vs. NKGSB Co-op. Bank Ltd & Anr. Dated 09.01.2023 Bombay High Court has given a ruling that refers to the appointment of an arbitrator on more than two occasions in the past three years with respect to disputes involving the same cooperative bank under Section 84 of the Multi-State Cooperative Societies Act, 2002 (MSCS Act) would not fall under the purview of the embargo created under clause 22 of Schedule V of the Arbitration and Conciliation Act, 1996 (A&C Act). It is held that the arbitrator’s appointment in statutory arbitration contemplated under the MSCS Act is made by the Central Registrar/Commissioner of Cooperative Societies under Section 84(4) of the MSCS Act. As such, the clause 22 of Schedule V of the A&C Act applies only when the arbitrator is appointed by one of the parties or an affiliate of one of the parties.
The case was brought before the Bombay High Court by the petitioners, who had availed certain credit facilities from the respondent, NKGSB Cooperative Bank Ltd. After certain disputes arose between the parties, the matter was referred for arbitration under Section 84 of the MSCS Act. The petitioner challenged the constitution of the Arbitral Tribunal and sought recusal of the Sole Arbitrator. After the said application was rejected by the arbitrator, the petitioner filed an application before the Bombay High Court, contending that the mandate of the arbitrator stood terminated as he had become de jure or de facto unable to perform his functions under Section 14(1)(a).
The appointment was challenged on the ground that as per the disclosure provided by the Sole Arbitrator under Section 12(1), the arbitrator was appointed to adjudicate upon 10 different disputes to which the respondent, NKGSB Cooperative Bank, is a party. Since he has been appointed as arbitrator within the past three years on more than two occasions by one of the parties, the petitioner argued that this circumstance would give rise to a justifiable doubt as to his independence and impartiality.
However, the Bombay High Court held that the appointment of the Sole Arbitrator by the Commissioner of Co-operation and Registrar of Cooperative Societies (respondent no. 3), by acting as a delegate of the Central Registrar (respondent no. 2), who is empowered to appoint an arbitrator under Section 84(4) of the MSCS Act, fell outside the embargo created under clause 22 of the Vth Schedule. This is because the embargo created under clause 22 comes into picture only when the arbitrator is appointed by one of the parties or an affiliate of one of the parties. The same analogy would apply to an arbitrator appointed by an arbitration institution.
In conclusion, the decision of Bombay High Court provides clarity on the appointment of arbitrator in multiple disputes involving the same party.