8 August 2022


High Court of Bombay

Mohammed Kader Hassan Vs. Sree Gokulam Chit & Finance Co. (P) Ltd.




When self-contained machinery for settlement of disputes by means of arbitration is prescribed under provisions of Chit Funds Act, then it could not be varied by a private agreement between parties

By present petitions filed under Section 34 of the Arbitration and Conciliation Act, 1996, the Petitioner has impugned the arbitral awards, thereby allowing claims made by the Respondent. It is the case of the Petitioner that, without giving any opportunity to the Petitioner to cross examine the witness and also to lead evidence, the learned Arbitrator made an award, directing the Petitioner to pay a sum of Rs. 13,38,838 along with interest at the rate of Rs. 18 per cent per annum.

A perusal of the award indicates that, the learned Arbitrator has not even dealt with the issue of jurisdiction raised by the Petitioner in the application filed under Section 16 of Act, 1996 and has taken a casual approach in passing the award.

The Statement of Objects and Reasons of the Chit Funds Act, 1982 indicates that, the said Act has been enacted as a Central legislation, as a step, besides ensuring uniformity in the provisions applicable to chit fund institutions throughout the country to prevent such institutions from taking advantage either of the absence of any law governing chit funds in any State or exploit the benefit of any lacuna or relaxation in any State Law by extending their activities in such States.

The legislative intent is clear that self-contained machinery for the settlement of the disputes between a foreman and the subscribers by means of arbitration is prescribed under the provisions of the said Act, 1982 and thus could not be varied by a private agreement between the parties.

The impugned awards are set aside. Applications filed by the Petitioner under Section 16 of Act, 1996 are allowed. It is declared that, the learned Arbitrator did not have jurisdiction to entertain, try and adjudicate upon the disputes filed by the Respondent.

Tags : Dispute Adjudication Jurisdiction

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