RAJLAXMI MULTISTATE CREDIT CO-OPERATIVE SOCIETY LTD, THR. AUTHORIZED SIGNATORY, KSHITIJ TAYADE vs SMT. ASHWINI ANAND ANCHATWAR AND OTHERS

2026:BHC-NAG:4535
1 arbitration appeal116.2025.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
NAGPUR BENCH, NAGPUR.
ARBITRATION APPEAL NO. 116 OF 2025
APPELLANT
(Ori.N.A.No.1)
: Rajlaxmi Multistate Credit
Cooperative Society Ltd. (Regd.
No. MSCS/CR-554/2012), through
its Authorized Signatory, Shri
Kshitij Tayade, Head Office at
Mainde Chowk, Yavatmal, Tah.
and Dist. Yavatmal.
.. VERSUS ..
RESPONDENTS
(Ori.Applicant
No.1)
: 1)
Smt. Ashwini Anand Anchatwar,
Aged about 40 years, Occu:
Business, R/o Shriraj Nagar,
Wadgaon Road, Yavatmal, Tah. &
Dist. Yavatmal.
(Ori.Applicant
No.2)
2) Anand Parameshwar Anchatwar,
Aged about 48 years, Occu:
Business, R/o Shriraj Nagar,
Wadgaon Road, Yavatmal, Tah. &
Dist. Yavatmal.
3)
(Ori.N.A. No.3) M. S. Gangalwar,
Occu: Arbitrator, Rajlaxmi
Multistate Credit Co-operative
Society Ltd.
4)
(Ori.N.A. No.4) Avinash Madhukar Gandhewar,
Aged about 35 years, Occu:
Business, R/o 26, Ekvira Nagari,
Yavatmal, Tah. and Dist. -
Yavatmal.

- 2-
5)
Umesh Parasmal Kothari,
Aged about 60 years, Occu:
Business, R/o Shriji Complex, in
front of Gayatri Lawn, Yavatmal,
Tah. & Dist. Yavatmal.
Mr. Saurav P Rajurkar, counsel for appellant.
Mr. R. R. Deo, counsel for respondent Nos. 1 and 2.
CORAM : PRAVIN S. PATIL, J.
DATE OF RESERVE : 18/02/2026
DATE OF DECISION : 17/ 03/ 2026
JUDGMENT :
1. Heard. Rule. Rule made returnable forthwith. By
consent of Mr.Saurav P. Rajurkar, counsel for appellant
and Mr R.R. Deo, learned counsel for respondent Nos. 1
and 2, the application is taken up for final hearing at the
stage of admission.
2. This appeal is filed under Section 37 of the
Arbitration and Conciliation Act, 1996, by the
Appellant/Multistate Credit Co-operative Society Limited
to challenge the judgment and order passed by Principal
District Judge, Yavatmal in Civil Misc. Appeal No.
221/2022, whereby the Arbitration Award passed in
Arbitration Case No. ARB/RMCCSY/ylmb/911/2021 dated
25/06/2022 is quashed and set aside.
3. The submission of the appellant in the present

3
appeal is that the learned District Judge has transgressed
the scope of Section 34 of the Arbitration and Conciliation
Act, 1996 (hereinafter referred as ‘the Act of 1996’),
thereby violating the settled principles of law which
stipulate that scope of intervention of the Court in arbitral
matters is restricted only to the limited grounds provided
under Section 34 of the Act of 1996.
4. It is further submitted that the case of
respondent No.1 and 2 does not fall within any of the
grounds provided under Section 34 of the Act of 1996
and, therefore, the indulgence shown by the learned
District Judge in the matter is bad in law.
5. In the light of the submissions made by the
appellant challenging the judgment of the District
Judge, it would be necessary to state certain facts of
the present matter to verify whether the case of the
respondents falls within the grounds provided under
Section 34 of the Act of 1996 or not.
6. In the present case, admittedly, the
appellant/society on 27/03/2021 lodged a dispute under
Section 84 of the Multi-State Cooperative Societies Act,
2002 (for short ‘the Act of 2002’), read with Section 23 of
the Act of 1996, for recovery of an amount of
Rs.1,29,34,497/- (Rs. One Crore Twenty Nine Lakh Thirty
Four Thousand Four Hundred and Ninety Seven only),
along with interest and other charges against the
Respondent Nos.1 and 2.

4
7. The submission of the appellant before the
Arbitrator was that present respondent Nos. 1 and 2 are
the borrowers, respondent No. 3 and respondent Nos. 4
and 5 are the guarantors of the loan, and they are the
members of the Society. It was alleged that after
disbursement of loan, respondent Nos. 1 and 2 avoided
repayment of the loan as per the installments decided at
the time of disbursing the loan. It was further alleged that
present respondent Nos. 1, 2, 4 and 5 had availed the
membership rights of the society and therefore, the
dispute touches the business and management of the
society. Hence, as per Section 84 of the Act of 2002, the
dispute was referred and the same was tenable under the
provisions of law.
8. In response to the lodging of reference to the
Arbitrator, notices were issued to the respondent Nos. 1
and 2. The said respondents vide Exhibit Nos. 9 and 10,
informed the Arbitrator that because of surge of COVID-19
in the year 2021, their entire business was collapsed and
therefore, they are not in a position to repay the loan.
Accordingly, requested to grant time for repayment of
loan.
9. The said communication of the respondent Nos.
1 and 2 was taken on record by the Arbitrator. Thereafter
the claim affidavit has been filed by the appellant. The
Arbitrator, on the basis of claim affidavit, passed the
impugned award dated 25/06/2022 holding that
respondent Nos. 1, 2, 4 and 5 are jointly and severely

5
liable to pay Rs. 1,29,34,497/- with interest at the rate of
Rs.19% per annum from 13/2/2021 along with all charges
till its realization of the entire amount.
10. The respondent Nos. 1 and 2 thereafter preferred
an application under Section 34 of the Act of 1996 before
the learned District Judge. The respondents before District
Judge raised a grievance that in absence of any proof of
the respondents being member of the society as
contemplated under the provisions of Act of 2002, the
matter was entertained by the Arbitrator under the
presumption that they were members of the society.
Therefore, it was submitted that the Arbitrator committed
patent illegality in entertaining the dispute and hence the
respondents sought indulgence of the Court in the matter.
11. By the impugned judgment, learned District
Judge, after framing the issue, “as to whether the case is
made out to interfere by invoking the powers under
Section 34 of the Act of 1996 or not”, has specifically
recorded the finding in affirmative. While affirming this
finding, learned District Judge has held that he has
perused the entire record and proceedings of the
Arbitrator, and could not found any document on record
to indicate that respondent Nos. 1 and 2 have been
admitted to the membership of the appellant/society. It is
further recorded that although the appellant/bank, had
stated that by executing the term loan agreement, the
appellants had agreed to the rules and bye-laws of the
society, neither the said rules nor the bye-laws of the

6
society were produced to substantiate the claim that
appellants had acquired any interest in the applicant No.1/
society. Thus, it was not established on record that
respondent Nos. 1 and 2 are admitted to be the members
of the society and consequently the reference
proceedings under Section 84 of the Act of 2002 are itself
illegal. It is recorded that same was a patent illegality of
entertaining the Arbitration without considering the basic
ingredients. Hence, the award passed by the Arbitrator
was quashed and set aside.
12. In the light of the above said factual position, the
appellant approached before this Court and raised the
ground, which can be formulate as under :-
a] Whether the learned District Judge transgressed
the scope of Section 34 of the Act of 1996 in
interfering the award.
b] Whether learned District Judge was justified to
hold that respondent Nos. 1 and 2 being not
admitted as a members of the appellant/society,
the Arbitrator is justified to entertain and decide
the arbitration proceedings.
13. In respect of first issue regarding the scope of
interference of the learned District Judge in the
Arbitration Proceedings, it would be relevant to refer the
Section 34 of the Act of 1996, more particularly Section 34
of the Clause 2(a) which reads as under :-

7
34. Application for setting aside arbitral
award :-
(1) ......
(2) An arbitral award may be set aside by the
Court only if -
(a) the party making the application [establishes
on the basis of the record of the arbitral tribunal
that]—
(i) a party was under some incapacity; or
(ii) the arbitration agreement is not valid under
the law to which the parties have subjected it or,
failing any indication thereon, under the law for the
time being in force; or
(iii) the party making the application was not
given proper notice of the appointment of an
arbitrator or of the arbitral proceedings or was
otherwise unable to present his case; or
(iv) the arbitral award deals with a dispute not
contemplated by or not falling within the terms of
the submission to arbitration, or it contains
decisions on matters beyond the scope of the
submission to arbitration:
Provided that, if the decisions on matters submitted
to arbitration can be separated from those not so
submitted, only that part of the arbitral award
which contains decisions on matters not submitted
to arbitration may be set aside; or
(v) the composition of the arbitral tribunal or the
arbitral procedure was not in accordance with the
agreement of the parties, unless such agreement
was in conflict with a provision of this Part from
which the parties cannot derogate, or, failing such
agreement, was not in accordance with this Part; or
14. A perusal of this provision clearly states that an
Arbitration Award can be set aside by the Court if the
Arbitral award deals with a dispute not contemplated by,

8
or not falling within, the terms of submission to
Arbitration, or it contains decisions on matters beyond the
scope of submission to Arbitration. Further the same can
be set aside if the Court finds that award is patently
illegal appearing on the face of the award. Hence,
considering this provision, it is clear that under such
contingencies the arbitral award can be set aside by the
Court.
15. It will be relevant to refer the judgment of the
Hon’ble Supreme Court of India in the case of Delhi
Metro Rail Corporation Limited Vs Delhi Airport
Metro Express Private Limited 1 , wherein the Hon’ble
Supreme Court of India, has observed in paragraph Nos.
34, 35 and 36, which reads as under :-
34. The contours of the power of the competent
court to set aside an award under Section 34 has
been explored in several decisions of this Court. In
addition to the grounds on which an arbitral award
can be assailed laid down in Section 34(2), there is
another ground for challenge against domestic
awards, such as the award in the present case.
Under Section 34(2-A) of the Arbitration Act, a
domestic award may be set aside if the Court finds
that it is vitiated by ‘patent illegality’ appearing on
the face of the award.
35. In Associate Builders vs. Delhi
2
Development Authority a two-judge Bench of this
Court held that although the interpretation of a
contract is exclusively within the domain of the
arbitrator, construction of a contract in a manner
that no fair-minded or reasonable person would take,
1 (2024) 6 SCC 357
2 (2015) 3 SCC 49

9
is impermissible. A patent illegality arises where the
arbitrator adopts a view which is not a possible view.
A view can be regarded as not even a possible view
where no reasonable body of persons could possibly
have taken it. This Court held with reference to
Sections 28(1)(a) and 28(3), that the arbitrator must
take into account the terms of the contract and the
usages of trade applicable to the transaction. The
decision or award should not be perverse or
irrational. An award is rendered perverse or irrational
where the findings are;
(i) based on no evidence;
(ii) based on irrelevant material; or
(iii) ignores vital evidence.
36. Patent illegality may also arise where the
award is in breach of the provisions of the arbitration
statute, for instance the award contains no reasons at
all, so as to be described as unreasoned.
16. It will also be profitable to refer the judgment of
this Court in the case of Smt. Veena Wd/o Naresh
3
Seth vs Seth Industries Limited , wherein this Court
observed in paragraph Nos. -52 and 56 are as under :-
“52. If the above principle applies to arbitral
proceedings under the 1996 Act, the arbitrator
having lacked inherent jurisdiction, did not have
seisin of the case because the subject-matter was
alien to his jurisdiction. The award was therefore
made by a tribunal entirely lacking in jurisdiction in
respect of the subject-matter of the dispute. The
arbitrator having lacked inherent jurisdiction to
decide the matter his lack of jurisdiction was not
curable and could not have been waived. The award
would therefore be void. The only question is
whether the ratio of these judgments would also
apply to a Court hearing a petition under section 34
3 2011 (2) Mh.L.J. 226

10
of the Arbitration and Conciliation Act, 1996. If the
ratio applies to matters under the 1996 Act it would
be open to the petitioners to urge these contentions
in a petition under section 34 of the said Act even if
it was not raised before the arbitrator.
56. I cannot persuade myself to accept Mr.
Kamdar's submission that as the term 'validity' in
Section 16(1) includes questions of inherent lack of
jurisdiction, if an objection of inherent lack of
jurisdiction is not raised, it cannot be raised in a
petition under section 34.
Questions relating to the lack of jurisdiction which
can be waived or cured, must be raised as required
under section 16 of the Act. In that event, the
challenge to such findings under section 34 of the Act
would be dealt with in the same manner and on the
same principles as a challenge to an award in any
other respect. Questions relating to inherent lack of
jurisdiction may also be raised before the arbitrator.
However, that does not imply that if not raised
before the arbitrator questions relating to inherent
lack of jurisdiction cannot be raised in a petition
under section 34 of 1996 Act.”
17. Per contra, the submission of the appellant is
that the powers under Section 34 of the Act of 1996 are
restricted by various judgments of the Hon’ble Supreme
Court of India, for that purpose he has relied upon the
following judgments:
a] Punjab State Civil Supplies
Corporation Limited and Anrs Vs
4
Sanman Rice Mills and Ors
b] S.V.Samudram Vs State of Karnataka
5
and Ors
c] Fancy Builders Private Limited Vs Memon
4 2024 SCC OnLine SC 2632
5 (2024)3 SCC 623.

11
Co-operative Bank Ltd., 6
d] Rajlaxmi Multi-State Cooperative
Society Limited Yavatmal Vs Gajanan
7
Vasant Shirbhate and others
18. The appellant, by relying upon judgments of
the Hon’ble Supreme Court of India as well as this
Court, submitted that an Arbitral Award cannot be
interfered- with on the ground that award is illegal or
erroneous in law, nor can the Court, under Section 34 of
the Act of 1996, reappraise the evidence adduced
before the Arbitral tribunal. According to the appellant,
even an award which may unreasonable or is non-
speaking to some extent cannot ordinarily be interfered
with by the Court. It is stated that even if two views are
possible, there is no scope for the Court to re-appraise
the evidence and take a view different from that taken
by the Arbitrator. So also, it is stated that proceedings
under Section 34 of the Act of 1996, are summary in
nature and are not like a full fledge regular civil suit.
Therefore, the scope of Section 37 of the Act of 1996, is
supervisory in nature. As such, under Section 34 of the
Act of 1996, the Court cannot set aside the award, if the
requirement of Section 34 is satisfied. According to him,
interfering the award would amount to crossing
“Laxman Rekha”.
19. From the judgment referred by both the parties
and perusal of the Section 34 of the Act of 1996, in my
6 2015 SCC OnLine Bom 4915.
7 Arbn. Appeal No. 77/2025 dt. 14/10/2025 (Nagpur Bench)

12
considered opinion, this Court can looked into Arbitration
Award, in case if it is established before the Court that
arbitral award deals with a dispute not contemplated or
passed without following the terms of the arbitration, or if
the decisions on matters is passed beyond the scope of
arbitration. Interference is also permissible if it is found
that the award is vitiated by patent illegality appearing on
the face of the award.
20. In this background, it will be relevant to consider
what is the patent illegality. In this regard, it will be
relevant to refer the judgment of the Hon’ble Supreme
Court of India in the case of SSAngyong Engineering
and Construction Company Limited Vs National
8
Highways Authority of India (NHAI) , wherein the Hon’ble
Supreme Court of I n dia in paragraph No.41 of the
judgment has discussed of the decision can be considered
as a pe r verse.
“41. What is important to note is that a
decision which is perverse, as understood in
paragraphs 31 and 32 of Associate Builders
(supra), while no longer being a ground for
challenge under “public policy of India”, would
certainly amount to a patent illegality
appearing on the face of the award. Thus, a
finding based on no evidence at all or an award
which ignores vital evidence in arriving at its
decision would be perverse and liable to be set
aside on the ground of patent illegality.
Additionally, a finding based on documents
taken behind the back of the parties by the
arbitrator would also qualify as a decision
8 (2019) 15 SCC 131

13
based on no evidence inasmuch as such
decision is not based on evidence led by the
parties, and therefore, would also have to be
characterised as perverse.”
21. In the light of this legal position, it will be now
relevant to consider whether in the present case there is
any patent illegality committed by Arbitrator or whether
the Arbitration Award passed by the Arbitrator is beyond
scope of the submission to the arbitration.
22. In the present case, admittedly, before the
Arbitrator the matter was referred under Section 84 of the
Act, 2002. The Section 84 of the Act of 2002 would be
necessary to be considered in the matter.
84. 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 cooperative 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

14
(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.
23. A bare perusal of this provision states that if any
dispute touching to the constitution, management or
business of Multi-State Cooperative Society arises among
members, past members and persons claiming through
members, past members and deceased members, then such
dispute shall be referred to arbitration. It is further made
clear that for such reference of dispute amongst members,
the consent is not at all necessary as it is a statutory
provision for settlement of dispute between the members
of the Multi-State Cooperative Society.
24. In the light of this Section 84 of the Act of 2002,
it would be further relevant to refer Section 25 of the Act
of 2002, which defined who may become the members.
This provision specifically stipulates under Section 25(3)
that any person eligible for membership of a Multi-State

15
Cooperative Society, on his application can be admitted
as a member by such society. So also, the society is
required to dispose of such application within a period of
four months from the date of receipt and communicate to
the applicant within fifteen days from the date of decision
delivered to do exercise by the society of communicating
the decision, there is a deeming provision that on the
date of expiry of such period, it will be treated as refusing
admission to the person applying for the membership. As
such, perusal of Section 25 of the Act of 2002, it is clear
that no person can be become a member automatically,
and there is requirement of express decision of the
society for accepting his membership, and further such
application should be made by the person to get the
membership of the society.
25. In the light of this legal position, I have perused
the dispute referred by the appellant bank to the
Arbitrator, the claim affidavit, and the decision of the
arbitrator.
26. From these documents, it is revealed that,
Appellant to establish the fact that, respondent Nos. 1 and
2 are the member of the society, has only relied upon the
ledger book showing the share capital in their names as a
proof of membership. Except this, no other document is
placed on record.
27. Furthermore, the arbitrator, while deciding this
vital issue which goes to the root of the matter in his

16
award has only recorded in para-8 that disputant society
proved that opponents are members of disputant society
and dispute is tenable under Section 84 of the Act of
2002. Except this, there is no discussion on the part of the
arbitrator that how the present respondent No.2 became
a member of the society, particularly when, under Section
25 of Multi-State Cooperative Societies Act, 2002, the
specific procedure is incorporated to become the member
of the society. As such, prima-facie, it is clear that this
issue was not properly dealt with by the learned
Arbitrator.
28. It is further pertinent to note that the powers
available under Section 84 of the Act of 2002, for
reference of the proceedings without consent, is
permissible only in the case, if the dispute is amongst the
members of the society. Therefore, the essential
ingredient which needs to be established would be that
Respondent Nos.1 and 2 are the members of the society
against whom the dispute is referred. For that purpose,
necessary documents, such as an application for getting
membership of the cooperative society, or to
demonstrate from bye-laws of the society as to how
Respondent Nos.1 and 2 became the members of the
society while disbursing the loan, ought to have been
established on record. However, no such document has
been placed on record by the disputant bank. Only the
ledger book has been relied upon to conclude that
respondent Nos. 1 and 2 are the members of the bank.

17
29. In the circumstances, it will be relevant to refer
the judgment delivered by this Court in identical set of
the facts in the case of Prakash Vrundavan Thakkar
Vs Nagpur Nagrik Sahakari Bank Ltd. and others
reported in 2014 (3) Mh.L.J. 349 , wherein this Court
while considering the Section 84 of the Act of 2002 has
considered the definition of member and the material
which required to be placed on record. Accordingly, this
Court observed in paragraph Nos.8 and 11 as under:-
“8. There is absolutely no material placed on
record to indicate that the petitioner was admitted
to the membership of the respondent no.1 Society
upon payment to the society the dues in respect of
membership. Neither the rules nor byelaws of the
society are produced to substantiate the claim that
the petitioner acquired any such interest in the
society or is admitted to membership of the
respondent No.1 Society as is prescribed under the
rules or bye-laws of the said society. It has not
been established that the petitioner is a member,
past member or a person claiming through any
such member, past member or deceased member
of the society.
11. In the absence of there being any evidence on
record to show that the petitioner was a member of
respondent no.1 society at the time of referring the
dispute under Section 84(1)(b) of the Multi-State
Co-operative Societies Act, the learned Principal
District Judge has committed an error of law in holding
that the arbitral tribunal had jurisdiction to
entertain, try and decide the dispute between the
petitioner and the respondent no.1 society. ”
30. Per contra, the appellant in support of his
submission has heavily relied upon the judgment of this
Court in Arbitration Appeal No. 77/2025 decided on
14/10/2025, wherein, this Court held that the guarantors
of a loan are the members of the society. This Court to

18
held that they are the members of Society, relied upon
Section 128 of the Indian Contract Act, whereby the
guarantor’s liabilities is extensive with that of principle
debtor and accordingly hold that the Arbitral award
passed against them is legal and proper. However, in that
case, the issue was not discussed about the principal
borrower. As such, with due respect, I am of the opinion
that judgment delivered by the Coordinate Bench of this
Court in Arbitration Appeal No. 77 of 2025 is not
applicable in the matter rather the judgment delivered by
this Court in the case of Prakash Vrundavan Thakkar
(supra) of the Co-ordinate bench of this Court is
applicable in the matter.
31. In the present case, in my opinion, not deciding
the issue whether the respondent Nos.1 and 2 are
members of the society or not is the patent illegality
committed by the Arbitrator. It is not established by the
appellant/society even before this Court that they are
members of the society, consequently, the jurisdiction
exercised under Section 84 of the Act of 2002
automatically goes and consequently proceeding decided
by Arbitrator are vitiated.
32. It is further pertinent to note that as per the
settled principles of law, if the Arbitrator passed the
award by taking into accounts something irrelevant and
same is not based on concrete evidence and thereby, he
has committed wrong in arriving of its conclusion, same
amounts to patent illegality. As such, considering this
settled principles of law, in the present case, as the
Arbitrator has recorded his finding without having any

19
concrete evidence before him and take into account the
ledger book only to reach to the conclusion that
respondent Nos. 1 and 2 are the members of the society
is perse illegal and same is indirect violation of Section 25
of the Act of 2002.
33. In the circumstances, I am of the considered
opinion that, the case of the respondent Nos. 1 and 2
preferred before the District Judge specifically comes into
the category of the exceptions provided under Section 34
(2) and 2(a) of the Act of 1996. Hence, there is no
perversity or illegality committed by the District Court
while passing the impugned judgment.
Accordingly, I do not find any merits in the
present appeal and hence, present appeal stands
dismissed with no order as to cost.
(PRAVIN S. PATIL, J)
rkn