Arbitrator Appointed Under MSCS Act; Fixation Of Fees Is Subject To A&C Act: Madras High Court

Holding that there is no provision under the MSCS Act where an exemption has been provided with respect to Section 38 of the A&C Act, which requires the parties to equally bear the advance costs to be deposited before the Arbitral Tribunal, the Single Bench of Justice C. Saravanan set aside the order of the State Registrar directing the petitioner to pay the fees and expenses to the Arbitrator.

The respondent Sundaramoorthy raised a claim against the Chief Executive/Manager of the Air Corporation Employees Co-operative Credit Society before the State Registrar of the Co-operative Societies, and requested for referring the dispute to arbitration under Section 84 of the Multi State Co-operative Societies Act, 2002 (MSCS Act).

The State Registrar appointed an Arbitrator and passed an order directing the petitioner- Air Corporation Employees Co-operative Credit Society, to pay the fees and expenses for arbitration.

The petitioner challenged the order passed by the State Registrar by filing a writ petition before the Madras High Court.

The petitioner Co-operative Society submitted before the High Court that the State Registrar had no jurisdiction to appoint an Arbitrator and that only the Central Registrar is empowered to appoint an Arbitrator when a dispute is referred to arbitration under Section 84 of the MSCS Act.

The petitioner averred that the State Registrar had erred in fixing the fees of the Arbitrator. The petitioner added that the Central Registrar, who has been given the power to appoint an Arbitrator, has no jurisdiction to fix the fee of the Arbitrator.

Section 84 (1) of the MSCS Act provides that 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, arises between the specified persons relating to the constitution, management or business of a multi-State co-operative society, such a dispute shall be referred to arbitration. As per Section 84 (4), the arbitrator shall be appointed by the Central Registrar. Additionally. Section 84 (5) provides that, save as otherwise provided in the MSCS Act, the provisions of the Arbitration and Conciliation Act, 1996 shall apply to all arbitration under the MSCS Act as if the proceedings for arbitration were referred for settlement or decision under the provisions of the Arbitration and Conciliation Act.

The Bench noted that in view of the Notification dated 24.2.2003, issued under Section 4 (2) of the MSCS Act, the powers exercisable by the Central Registrar under Section 84 of the MSCS Act shall also be exercisable by the State Registrar of Cooperative Societies. Hence, the Court upheld the appointment of the Arbitrator by the State Registrar.

Observing that as per the provisions of Section 31 (8) of the Arbitration and Conciliation Act, 1996 (A&C Act), the costs of an arbitration shall be fixed by the Arbitral Tribunal in accordance with Section 31A, the Court noted that the Arbitrator has the power under Section 38 of the A&C Act to fix the amount to be deposited as an advance, which is to be borne equally by both the parties.

The Court added that Rule 30 (1) of the Multi State Co-operative Societies Rules, 2002, which has been provided to implement Section 84 (4) of the MSCS Act, provides that the Central Registrar may appoint and fix the fee of the arbitrators, subject to the provisions of the A&C Act.

Noting that Rule 30 (2) stipulates that the provisions of the A&C Act shall apply to all arbitration under MSCS Act, save as otherwise provided, the Bench held that there is no provision under the MSCS Act where an exemption has been provided with respect to Section 38 of the A&C Act.

Hence, the Court ruled that though a power is vested with the Central Registrar to not only appoint an arbitrator but also fix the fees of the arbitrator; however, the said power is subject to the provisions of the A&C Act. Consequently, the Court held that the provisions regarding fixation of fees as provided under the A&C Act would have to be followed.

"Rule 30 (1) of the Multi State Co-operative Societies Act, 2002, makes it clear for that the Central Registrar may appoint Arbitrar and fix the fee of the arbitrator subject to the provisions of the Arbitration and Conciliation Act, 1996. Thus the method for appointment and fixation of the arbitrator under the provisions of the Arbitration and Conciliation Act, has to be followed".

Thus, the Court set aside the order passed by the State Registrar directing the petitioner to pay the fees and expenses to the Arbitrator. The Court directed the Arbitrator to exercise discretion and fix the fees to be paid by the parties by applying Section 31(8), Section 31A and Section 38 of the A&C Act and the relevant provisions of the MSCS Act.

Case Title: Air Corporation Employees Co-operative Credit Society Ltd. versus Registrar of Co-operative Societies

Dated: 27.06.2022 (Madras High Court)

Citation: 2022 LiveLaw (Mad) 369

Counsel for the Petitioner: Mr. L. Manoharan for Mr. A. Jenasenan

Counsel for the Respondent: Ms. C. Meera Arumugam, Additional Government Pleader and Mr. R. Arunkumar for M/s. V.V. Srinivasan

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