Ravji Laxman Patel v. Shree Gokulam Chit and Finance Co. (P) Ltd

IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION COMMERCIAL ARBITRATION PETITION NO. 992 OF 2019 Ravji Laxman Patel ...Petitioner Versus M/s. Shree Gokulam Chit And Finance Co. (p) Ltd. ...Respondents

_______ Ms. Neeta Solanki, for Petitioner. None for the Respondent. _______ CORAM:

AARTI SATHE, J. DATE: 14 OCTOBER 2026 P.C.

¶1Heard Ms. Neeta Solanki, learned counsel for the Petitioner. None appears on behalf of the Respondent, despite service of notice.

¶2Learned counsel for the Petitioner has placed on record an affidavit of service dated 6 January 2026, evidencing service of the aforesaid Petition upon the Respondent. The same is taken on record.

¶3This is a Petition under Section 34 of the Arbitration and Conciliation Act, 1996 (the Act), whereby the Petitioner seeks to set aside the arbitral award dated 29 December 2017,(impugned award) inter alia, on the ground of lack of jurisdiction of the Arbitral Tribunal.

¶4Learned counsel for the Petitioner submits that, in a similar dispute involving the same Petitioner, the same Respondent and rendered by the same JYOTI RAJESH MANE Date: 2026.10.16 16:57:32 +0530 Arbitratral Tribunal, a co-ordinate Bench of this Court, by its judgment/order dated 5 April 2021, allowed the Petition after recording detailed findings on the issue of jurisdiction.

¶5She further submits that the reasoning adopted in the impugned award in the present Petition is similar to that adopted in the arbitral award which was the subject matter of the decision of the Coordinate Bench dated 5 April 2021, the only difference being the amount of the award. The amount awarded in the present case is Rs.2,54,02,468/- .

¶6Learned counsel has also placed on record Commercial Arbitration Petition No. 725 of 2018, in which the judgment/order dated 5 April 2021 was passed by a co-ordinate bench of this Court, and submits that the findings recorded therein cover the issues arising in the present Petition.

¶7Having perused the papers and proceedings, the impugned award and the judgment and order dated 5 April 2021 passed by the co-ordinate Bench of this Court, this Court is of the view that, as rightly submitted by learned counsel for the Petitioner, the issues arising in the present Petition are squarely covered by the aforesaid judgment and order dated 5 April 2021. The relevant paragraphs of the judgment and order dated 5 April 2021 are reproduced hereinbelow: 4 Mr. Khandeparkar submitted that under Section 64(1) of Chit Funds Act, there is non obstante provision, as it says, notwithstanding anything contained in any other law for the time being in force, any dispute touching the management of chit business shall be referred by any of the parties to the dispute, to the Registrar for arbitration if each party thereto fall under category provided under clauses (a) and

(b) of sub-Section (1) of Section 64. Mr. Khandeparkar also submits that under Section 64(3) of the Chit Funds Act, there is a bar on civil courts entertaining any suit or other proceedings in respect of any dispute referred to in sub-section (1) of Section 64. Section 64 of Chit Funds Act reads as under: "64. Disputes relating to chit business.— (1) Notwithstanding anything contained in any other law for the time being in force, any dispute touching the management of chit business shall be referred by any of the parties to the dispute, to the Registrar for arbitration if each party thereto is one or the other of the following, namely:—

(a) a foreman, a prized subscriber or a non-prized subscriber, including a defaulting subscriber, past subscriber or a person claiming through a subscriber, or a deceased subscriber to a chit;

(b) a surety of a subscriber, past subscriber, or a deceased subscriber. Explanation—For the purposes of this sub-section, a dispute touching the management of a chit business shall include,—

(i) a claim by or against a foreman for any debt or demand due to him from a subscriber, or due from him to a subscriber, past subscriber or the nominee, heir or legal representative of a deceased subscriber whether such debt or demand is admitted or not;

(ii) a claim by a surety for any sum or demand due to him from the principal borrower in respect of a loan by a foreman and recovered from the surety owing to the default of the principal borrower, whether such sum or demand is admitted or not; and

(iii) a refusal or failure by a subscriber, past subscriber or the nominee, heir or legal representative of a deceased subscriber to deliver possession to a foreman of land or any other asset resumed by him for breach of conditions of the assignment.

(2) Where any question arises as to whether any matter referred to for the award of the Registrar is a dispute or not for the purposes of sub-section (1), the same shall be decided by the Registrar whose decision thereon shall be final.

(3) No civil court shall have jurisdiction to entertain any suit or other proceedings in respect of any dispute referred to in sub-section (1)."

5 In the statement of claim filed before the Arbitral Tribunal, respondent has described petitioner as 'member / subscriber / surety of claimants ……….'. Therefore, petitioner would certainly fall under the category mentioned under Section 64(1) of the Chit Funds Act and this issue has been dealt with by a Learned Single Judge of this Court in Dinesh Jaya Poojary Vs. Malvika Chits India Pvt Ltd.1 The Learned Single Judge (R.D.Dhanuka J.) has held that dispute between the subscriber and chit fund company would be a dispute touching the management of chit business and such dispute has to be referred to the Registrar for arbitration. It will be useful to reproduce paragraphs 27, 28, 29, 33, 34, 37, 38 and 39 of the judgment. The said paragraphs read as under:

¶27A perusal of the record indicates that the petitioner has disputed the alleged Agreement of Guarantee dated 13th August 2012 between the petitioner and the respondent in the letter dated 19th July 2013 addressed by the petitioner through his advocate to the respondent's advocate. The finding of the learned arbitrator that there is no dispute about execution of 2019 SCC Online Bom 1121 the said Agreement of Guarantee is thus ex facie contrary to the pleadings and documents on record.

¶28Even if any such Agreement of Guarantee was executed between the petitioner and the respondent as sought to be canvassed by the respondent before the learned arbitrator and also in this proceeding, question that arises for consideration of this Court is whether such Agreement of Guarantee between the petitioner and the respondent would fall under the provisions of the Chit Funds Act and thus the dispute having arisen between the petitioner and the respondent under such agreement could be referred only to the Registrar under Section 64(1) of the Chit Funds Act for Arbitration or not. The question also arises for consideration of this Court is whether statement of claim filed by the respondent for recovery of the amount under the said letter of guarantee was arising out of dispute touching the management of chit business and was between the parties described in Section 64 (1)(a) and (b) read with the explanation to the said provision or not.

¶29A plain reading of Section 64 clearly indicates that Sub-section (1) of Section 64 provides for non obstante provision i.e. notwithstanding anything contained in any other law for the time being in force, any dispute touching the management of chit business shall be referred by any of the parties to the dispute, to the Registrar for arbitration if each party thereto is one or the other of the parties mentioned in Section 64(1)(a) and (b). The expression "any dispute touching the management of chit business" is explained in the explanation to the said Section 64(1). Section 64(1)(b) clearly refers to a surety of a subscriber, past subscriber or a deceased subscriber. It is thus clear beyond reasonable doubt that even if the said Harish Pujary was considered as past subscriber, surety of such past subscriber or a foreman or vice-versa could be referred only to the Registrar for arbitration.

¶33In my view, dispute between the petitioner and the respondent was relating to chit business between a surety of a subscriber and a foreman. Even if the petitioner would be considered as a surety of past subscriber i.e. Harish Pujary, it would still fall under Section 64(1) (b) of the said Chit Funds Act and thus such dispute arising out of and relating to chit business could be referred only to the Registrar for Arbitration by the respondent and not to the learned arbitrator by invoking clause 6 of the alleged Agreement of Guarantee.

¶34In my view, statement of claim filed by the respondent against the petitioner before the learned arbitrator for resolution of the dispute arising out of chit business was a dispute touching the management of the chit business and thus this condition also was fully attracted to the facts of this case. Filing a claim for recovery of alleged dues under a Chit under a Chit Funds Act by a foreman amounts to a dispute touching the management of chit business.

¶37A conjoint reading of the aforesaid provisions clearly indicates that the said Chit Funds Act, 1982 is a self-contained Code. The provisions of the Arbitration and Conciliation Act, 1996 thus would not apply to the disputes relating to the chit business. Under Sub-section (3) of Section 64 of the said Chit Funds Act, a Civil Court is barred from entertaining any suit or other proceedings in respect of any dispute referred in Sub-section (1) of Section 64 of the said Chit Funds Act. This provision also clearly indicates that if a Civil Court is barred from entertaining any suit or other proceedings, arbitral proceedings initiated by the respondent for recovery of the amount arising out of disputes relating to chit business touching the management of chit business also cannot be entertained. Such disputes could be referred only to the Registrar for Arbitration provided in Section 64 of the said Chit Funds Act. The judgment of the Madras High Court in the case of Vimala(supra) relied upon by Mr.Purohit, learned counsel for the petitioner would assist the case of the petitioner.

¶38A perusal of the findings rendered by the learned arbitrator on the issue of jurisdiction clearly indicates that the same are totally contrary to the plain reading of Section 64 of the said Chit Funds Act read with Section 3 thereof read with definition of "foreman" under Section 2(j) and definition of "subscriber" under Section 2(r). The findings rendered by the learned arbitrator being perverse thus deserves to be interferred with. In my view, learned arbitrator has clearly acted beyond the jurisdiction in entertaining the claims made by the respondent and allowing the said claims. Even if the petitioner had allegedly entered into any such Agreement of Guarantee with the respondent, such Agreement of Guarantee recording arbitration agreement was contrary to Sub-section (1) of Section 64 read with Section 3 of the said Chit Funds Act.

¶39In my view, the exclusive remedy of the arbitration before the Registrar under Section 64 of the said Chit Funds Act being statutory arbitration can not be varied by an agreement of parties by referring the dispute to private arbitral forum contrary to Section 3 of the said Chit Funds Act. Such agreement even if entered into between the petitioner and the respondent recording an arbitration agreement and substituting the remedy under Section 64 by private arbitration is inconsistent and contrary to the said provision and thus could not be acted upon. The decision of the learned arbitrator on this issue itself is totally perverse and is in conflict with the public policy.

6 In the circumstances, when petitioner has been described in the statement of claim as member / subscriber etc., this judgment in Malvika Chits (supra) will squarely apply. Therefore, in my view, the conclusions arrived at by the Learned Arbitrator in the application under Section 16 of the Act filed by petitioner has to be interfered with. 7 The award is set aside. It is open to respondent to take such steps as advised in accordance with law. 8 Petition accordingly stands disposed.

¶8Considering the findings recorded by a co-ordinate bench of this Court on a similar issue in its judgment and order dated 5 April 2021, and in the absence of any material difference in the facts of the present case, except for the quantum of the award, this Court is of the view that the present Petition is also squarely covered by the aforesaid judgment and order dated 5 April 2021.

¶9In view thereof, the impugned Arbitral award is set aside and the Petition stands disposed of accordingly. It is open to the Respondent to take such steps as may be advised in accordance with law.

(AARTI SATHE, J.)