Mr. Ajeet Madhukar Mulay v. Abhyudaya Co-Operative Bank Limited

carbp 843-24+(2).doc—————Mr. Rahul Totala a/w. Ms. Vidisha Rohira and Ms. Iqra Qureshi for thePetitioner. Mr. Sanjiv Punalekar a/w. Mr.Yogesh Mishra i/by PRS Legal forRespondent No.1.—————Coram:Sharmila U. Deshmukh, J.Reserved on : April 17, 2026Pronounced on: June 09, 2026JUDGMENT :1.The Petitioners in this group of petitions are guarantors offinancial assistance availed by M/s Nirmangold Alloys Private Limitedand M/s.Nirmangold Plasttech Private Limited, who are sisterconcerns. The challenge is to the Arbitration Awards alongwith theorders passed in the applications filed by the Petitioners in thearbitration proceedings. The Learned Sole Arbitrator was appointedunder Section 84 of the Multi-State Co-operative Societies Act, 2002(for short, “MSCS Act”) in applications filed by AbhyudayaCo-operative Bank Ltd. for recovery of the outstanding amounts.Common submissions were advanced by learned counsel for theparties and the Petitions are being disposed of by this commonjudgment. FACTUAL MATRIX:2.Commercial Arbitration Petition No.843 of 2024 has been filedby Ajeet Madhukar Mulay, who was the original Opponent No.5 inArbitration Case No.ARB/ACB/VNL/2064 of 2022. The Claimant in thesa_mandawgad4 of 36 carbp 843-24+(2).docarbitration case is Abhyudaya Co-operative Bank Limited.  Theprincipal borrower was M/s. Nirmangold Alloys Private Limited, whichwas undergoing corporate insolvency process and in view of themoratorium was not impleaded as party. Ajeet Mulay was impleadedin his capacity as guarantor alongwith other guarantors and Directorsof M/s. Nirmangold Alloys Private Limited, who had given personalguarantee for repayment of the debt..3.Commercial Arbitration Petition No.849 of 2025 has been filedby Monica Ajeet Mulay who was the original  Opponent No.6  inArbitration Case No ARB/ACB/VNL/2065 of 2022. The Claimant wasAbhyudaya Co-operative Bank  Limited and the principal borrower wasM/s.Nirmangold Plasttech Private Limited, the sister concern of M/s.Nirmangold Alloys Private Limited. Monica Ajeet Mulay wasimpleaded in the capacity of guarantor alongwith other guarantorsincluding Ajeet Mulay and Directors of M/s. Nirmangold PlasttechPrivate Limited, who had given personal guarantee for repayment ofthe debt. 4.Commercial Arbitration Petition No.1053 of 2025 is filed byAjeet Mulay challenging the impugned Award of 12th February, 2024,which is already the subject matter of Arbitration Petition No.843 of2024, and for setting aside the order dated 28th April, 2023 passed bythe Learned Arbitrator in application below Exhibit 24 filed by thesa_mandawgad5 of 36 carbp 843-24+(2).docPetitioner under Section 12 r/w Section 13 of the Arbitration andConciliation Act, 1996 (for short, “Arbitration Act”), the order dated25th January, 2024 passed in application below Exhibit 41 seekingopportunity of cross-examination of witness in Arbitration CaseNo.2065 of 2022 and also seeks the relief of framing of issues inArbitration Case No.2065 of 2022.5. Arbitration Case No.2064 of 2022 arises of arbitrationproceedings invokved by the Disputant Bank seeking recovery ofoutstanding amount of Rs.34,18,53,481.21 w.e.f 1st May, 2022 tillpayment or realisation. The facts borne out of the impugnedArbitration Award is that M/s. Nirmangold Alloys Private Limited wasthe principal borrower, who had availed cash credit facility, letter ofcredit facility and term loans from the Respondent No.1-Bank in theyear 2015.  There was rescheduling of seven term loans in April, 2019at the request of the principal borrower. The rescheduled term loanswere secured by hypothecation of stock and book debts and plant andmachinery and all the credit facilities were secured by mortgage ofimmoveable properties. The documents executed by the guarantors inrespect of the financial assistance availed by the principal borrowerare set out in the Statement of Claim which included letters ofguarantee and undertaking.6.Due to default in repayment, the credit facility accounts of thesa_mandawgad6 of 36 carbp 843-24+(2).docCompany were classified as NPA and notices were issued to theprincipal borrower and the guarantors which was not complied with.Hence, the Dispute came to be filed under Section 84 of MSCS Act. 7.During the pendency of arbitration proceedings, in view of thePetitions filed by the Opponent Nos.1 and 4 i.e. Bhushan Patil andAnita Patil under Section 94 of IB Code, the Learned Sole Arbitratorheld that as moratorium had commenced, the arbitration cannot beproceeded against the Opponent Nos.1 and 4.8.The  impugned Award records the stand taken by the presentPetitioner raising an objection to the jurisdiction of the Tribunal. Itwas contended that the documents of guarantee, arbitrationagreement  and deeds of mortgage are insufficiently stamped andunenforceable in law. During corporate insolvency resolution process,it was revealed by the forensic audit team appointed through theResolution Professional that there was fraud by the Company andtherefore, there is no legally enforceable debt against the Petitioner.The deed of guarantee is vitiated by fraud which is not non- arbitrable.The membership of the Bank and the execution of consent letters wasdenied. It was contended that the Petitioner is not signatory to therestructured credit facility and on restructuring of credit facility allprior sanctioned letters stood cancelled and the surety standdischarged, the contract being varied.sa_mandawgad7 of 36 carbp 843-24+(2).doc9.In Arbitration Case No.2065 of 2022, Ajeet Mulay and MonicaMuley both were impleaded as party. Similar defence was raised bythe Petitioners and in addition it was contended that the Bank hadfiled Company Petition No. 382 of 2022 against M/s. NirmangoldPlasttech Pvt. Ltd under Section 7 of IB Code, which was reserved fororders and the Bank has also put up the principal borrower’s propertyfor auction. An objection was taken about the Bank pursuing samecause of action in multiple fora.10.In both the arbitration proceedings, the Petitioners had filed anapplication under Section 12 r/w Section 13 of the Arbitration Actclaiming that the sole Arbitrator has failed to make mandatorydisclosures, that the Sole Arbitrator was appointed for 55 arbitrationsand the disclosures stated that there were only 19 on goingarbitrations. It was contended that the Arbitrator has served in otherarbitrations where the Bank was a party which gives rise to justifiabledoubts regarding the independence and impartiality of the Arbitrator.The Petitioners also filed application seeking permission to crossexamine the Bank’s witness, which was rejected.11.The Petitioners had filed an application on 6th February, 2024seeking framing of issues in Arbitration Case No 2065 of 2022 in viewof subsequent filing of written statement pursuant to consentminutes of order dated 19th October, 2023 passed in the Petition filedsa_mandawgad8 of 36 carbp 843-24+(2).docin this Court. It is not shown that any order was passed on the saidapplication. IMPUGNED AWARD DATED 12 th FEBRUARY, 2024 IN ARBITRATION CASE NO.2064 OF 2022 AND ARBITRATION CASE NO.2065 OF2022:12.The Learned Sole Arbitrator has rendered broadly identicalfindings in both the arbitration proceedings, which can be summarisedas under:(a)The arbitration cannot be proceeded against theOpponent Nos.1 and 4 i.e. Bhushan Patil and Anjali Patil inview of commencement of moratorium upon filing ofPetition under Section 94 of IB Code.(b)The Affidavit of Evidence of the Bank’s witness proves thedocuments and hence the Bank’s claim is duly proved. (c)The Opponents are members of the Bank and thedocuments of consent letters of surety, letters ofguarantee, promissory notes  are duly signed by theOpponents.(d)Petitioners did not apply for handwriting expert and hisadmitted signature can be compared with the signatureof the documents and there is no mismatch.(e)As per the guarantee executed by the Petitioners, theavailable rights under Section 133, 134, 135, 139 and 141of Indian Contract Act, 1872 stand waived andsa_mandawgad9 of 36 carbp 843-24+(2).docrestructuring of facilities was permitted. There is nodischarge from the liability. (f)In view of Section 2(4) of Arbitration Act, Part I ofArbitration Act applies to MSCS Act as the enactment isan arbitration agreement and the contention ofinsufficiency of stamp duty on arbitration agreement isrejected. (g)In so far as insufficiency of stamp duty on guaranteeagreement and mortgage deed are concerned, Section 4of Maharashtra Stamp Act is applicable  where there areseveral instruments and the principal instrument ischargeable with duty. Registering Authority has notraised any dispute about insufficiency of stamp duty. Petitioners have not raised any dispute at the executionof the documents regarding insufficiency of stamp dutyand have agreed in writing that no objection will be raisedfor insufficiency of stamp duty.ORDER DATED 28 th APRIL, 2022 PASSED ON APPLICATION FILED UNDER SECTION 12 r/w Section 13 OF ARBITRATION ACT :13.The Learned Sole Arbitrator in view of the decision of this Courtin Kalpesh Shantikumar Mehta and others vs. NKGSB Co-op. BankLtd. and Anr. and KSM Multi trade LLP and other vs. NKGSB Co-op.Bank Ltd. and Anr.1 held that in statutory arbitration neither Entry 22nor Entry 24 of Fifth Schedule affects the appointment made in12023 SCC OnLine Bom 3215sa_mandawgad10 of 36 carbp 843-24+(2).docmultiple matters by the Registrar. The Learned Sole Arbitrator heldthat mandatory disclosure has been made. ORDER DATED 25 th JANUARY, 2024 PASSED ON APPLICATION SEEKING OPPORTUNITY TO CROSS EXAMINE THE BANK’SWITNESS:14.The Bank led evidence of one R.S. Gurav by filing an affidavit ofevidence dated 15th September, 2023 and application was moved bythe Petitioners seeking permission to cross examine the witness.Thelearned Arbitrator held that the matter pertains to bankingtransaction and the application filed by the Petitioners for cross-examination does not disclose any reason for cross-examination. Itheld that the Petitioners have to prove their defence. The notificationdated 24th January, 2023 and suspension of the board of directors bythe said notification is an admitted fact and the notification itselfpermits the normal activities of the Bank to go on and the notificationdoes not assist the case of Petitioners’s application for crossexamination. SUBMISSIONS:15.Mr. Totala, Learned counsel appearing for the Petitionerssubmits that the Learned Arbitrator has not framed issues andconducted two separate arbitrations simultaneously without consentof the parties at Mumbai despite the Petitioners residing atsa_mandawgad11 of 36 carbp 843-24+(2).docAurangabad. He points out the identical findings in both the Awardsto submit that the findings in the Awards are copy pasted and suffersfrom non application of mind.16.He submits that two of the guarantors had filed Petitions underSection 94(1) of IB Code, which results in stay of the debt and hencethe arbitration proceedings could not have been proceeded withagainst the Petitioners. He submits that the Learned Arbitrator stayedthe proceedings only against Bhushan Patil and Anjali Patil and notagainst the Petitioners. He would further submit that Bhushan Patiland Anjali Patil had suppressed the fact that by order dated 16thSeptember, 2023, the application of Bhushan Patil was dismissed withliberty to file fresh application and thereafter fresh application wasfiled. He submits that considering the imposition of moratorium, theLearned Arbitrator stayed the proceedings only against them, which iscontrary to the settled position of law. 17.He submits that prior to filing of the statement of claim,Nirmangold Alloys Private Limited went into insolvency and underSection 14 of the IB Code, moratorium was imposed qua the debt andhence the arbitration proceedings could not have proceeded evenagainst the present Petitioners. 18.He submits that the Arbitrator has violated the principles ofnatural justice by denying the Petitioners leave to cross examine thesa_mandawgad12 of 36 carbp 843-24+(2).docBank’s witness and denying opportunity of filing evidence. He pointsout that the Learned Arbitrator has held that the Petitioner has notadduced any evidence and that his reply can be considered asevidence. He submits that the Petitioner filed his written statementon 20th October, 2023 after the issues were framed and despite theapplication dated 6th February, 2024 requesting for framing of issues,the Learned Arbitrator has rejected the same on the ground that CPCis not applicable.19.He submits that the Arbitration Award suffers from patentillegality as it is based on unverified and unproved documents andthat the original documents were not even produced on record. Hesubmits that the impugned Awards hold that the claims are provedbased on unproven documents, which is contrary to law andfundamental policy, which constitutes patent illegality justifyingsetting aside of the Awards under Section 34(2)(b) of Arbitration Act.  20.He would further point out that in the statement of defencespecific objections were taken to the jurisdiction as the Petitionerswere not members of the Bank, the insufficiently stamped deeds ofguarantee, the issue of fraud which according to him is non arbitrable,the denial of execution of documents. 21.He would submit that the Learned Arbitrator has adopted anunscientific approach by comparing the Petitioners’ signatures withsa_mandawgad13 of 36 carbp 843-24+(2).docnaked eye, whereas an expert ought to have been appointed underSection 26 of Arbitration Act and in view of specific case of thesignatures being forged. 22.He would submit that pending the arbitration, an administratorcame to be appointed on 3rd November, 2023 and there was no freshauthorisation from the administrator to continue with the arbitration.He would submit that the Award was passed on 12th February, 2024,whereas the term of 12 months was expired on 3rd March, 2022 and noextension was granted.23.He submits that despite the specific contention that thePetitioners had not signed the membership form, the LearnedArbitrator has held that the Petitioners have become members of theBank. He would further point out the requirements of membershipset out in Section 25 of the MSCS Act and would submit that theLearned Arbitrator has held the Petitioners to be members only onthe basis of forms produced by the Bank. 24.He would further submit that the arbitration Award grantsinjunction against the mortgaged property which is non arbitraldispute. He would further submit that one of the guarantors had filedFIR against the company and the Bank, and issue of fraud is nonarbitrable. He would further point out that the Learned Arbitratorthough held that the fraud is not an arbitrable dispute has thereaftersa_mandawgad14 of 36 carbp 843-24+(2).docheld that the money lent by the disputant Bank was not money of anywrongful gain but it is public money. 25.He would further point out that the findings of the learnedArbitrator that the guarantee itself permits for restructuring offacilities and therefore it cannot be accepted that the guarantor isdischarged from the liability is contrary to statute and is patentlyillegal. 26.He points out that in so far as insufficiency of stamp duty inrespect of seven guarantee agreements and six mortgage deeds, theLearned Arbitrator has held that it is the borrower, who has to bearthe burden of stamp duty and that the Petitioner in writing hasagreed that he will not raise any objection for insufficiency of stampduties, which is contrary to statute. In support, he relies upon thefollowing decisions:(i) Vedansh Hospitality and Resorts Ltd. and Ors. vs. NewIndia Co-operative Bank Ltd. & Ors.2 ,(ii) M/s. Divya Enterprise and Ors. in Capri Global CapitalLimited vs. M/s.Divya Enterprise (Partnership Firm) andOrs.3,(iii) Deepti Prakash Ghare vs. NKGSB Co.Op. Bank Ltd.4 ,(iv) Neepa Real Estate Pvt. Ltd. vs. State of Maharashtraand Ors.5, 2Arbitration Petition No.484 of 2012 dated 29.01.20133IA(L)No.25700 of 2025 in Com.Suit (L) No.23360 of 2025 dated 09.10.20254Comm.Arbitration Petition (L) No.6358 of 2022 dated 07.01.20235Writ Petition No.1395 of 2023 dated 13.12.2025sa_mandawgad15 of 36 carbp 843-24+(2).doc(v) M/s. Hotel Sea Point Pvt. Ltd. Puri vs. M/s. Blueline Resorts Pvt. Ltd.6, (vi)Rajlaxmi Multistate Credit Co-op. Society Ltd. Vs. Smt.Ashwini Anand Anchatwar and Ors.7,(vii) Booz Allen and Hamilton Inc. v. SBI Home Finance Ltd.and Ors.8,(viii) Naresh Kanayalal Rajwani and Ors. vs. M/s. CitiFinancial Consumer Finance India Ltd.9,(ix) Vidya Drolia & Ors. vs. Durga Trading Corporation10,(x) DJO v. DJP and Ors.11,(xi) Sukhbir Singh v. Hindustan Petroleum CorporationLtd.12,(xii) Prema Amarlal Gera v. Memon Co-operative Bank Ltd.13,(xiii) M/s Narinder Singh and Sons vs. Union of India,14,(xiv) Serosoft Solutions Pvt. Ltd. vs. Dexter Captial AdvisorsPvt. Ltd.15,(xv) Tata Capital Ltd. v. Geeta Passi and Ors.16,(xvi) Smt. Sunita vs. Smt. Parmjeet Kaur17,(xvii) S. Madhan vs. A Venkateshwaran18,(xviii) Bi-water Penstocks Ltd. v. Municipal Corporation ofGreater Bombay and Anr.19,6AIR 2025 ORISA 1057Arbitration Appeal No.116 of 2025 dated 17.03.20268(2011) 5 SCC 5329Arbitration Petition No.427 of 2013 dated 17.08.202510(2021) 2 SCC 1112024 SGHC (I) 24122020 SCC OnLine Del 228132017 SCC OnLine Bom 7214Civil Appeal No.6734 of 2021 dated 18.11.202115Civil Appeal Nos.51-52 of 2025 dated 03.01.2025162024 SCC OnLine Bom 189717(2025) 3 ADJ 22618MANU/TN/9314 /202219Appeal No.457 of 2002 dated 24.11.2010sa_mandawgad16 of 36 carbp 843-24+(2).doc(xix) BRS Ventures Investments Ltd. vs. SREI InfrastructureFinance Ltd. and Anr.20,(xx) V. Shankar and Anr. vs. The Authorised Officer andAnr.21.27.Mr. Punalekar, Learned counsel appearing for the RespondentNo.1 Bank submits that the Learned Arbitrator has not granted nonarbitrable reliefs as the relief of debt adjudication falls under Section84 of the MSCS Act and all other reliefs are ancillary reliefs.  Hesubmits that there are two arbitration disputes of two borrowers whoare related entities and were heard together wherein the pleadingswere similar, if not identical, and that is the reason for identicalreasoning in both the Awards which does not vitiate the Awards.28.He submits that the request for cross-examination was made atthe end of the proceedings and there was no case made out for crossexamination in the application filed by the Petitioners. He submitsthat in so far as absence of admission and denial of documents isconcerned, there is no prejudice caused to the Petitioners.29.He submits that the disclosures given by the Arbitrator was insubstantial compliance of the law. He would further submit that themoratorium under Section 14 of the IB Code was not applicable to thePetitioners. He would submit that insofar as the objection that noconsent of the Petitioner was taken to conduct arbitration petition is20Civil Appeal No.4565 of 2021 dated 23.07.202421SARFASESI Application No.470 of 2022 dated 12.02.2024sa_mandawgad17 of 36 carbp 843-24+(2).docconcerned, the Arbitrator was appointed by the Central Registrar andno prejudice is caused to the Petitioners by holding the proceedingsat Mumbai. He submits that the written statement itself was filedbelatedly and the application for framing of issues was not submittedtill the end of the proceedings.30.He submits that the objection to jurisdiction on the ground ofPetitioners not being the member of the Respondent has beensufficiently negated by the membership proof which is alreadyproduced on record. He submits that it is not the case of thePetitioners that the membership forms are forged. 31.He submits that the Petitioner’s submission on illegal findingson forgery signature by comparing documents is an afterthought andthat the Petitioner has consciously joined the loan transactions. Hesubmits that the ruling of the Learned Arbitrator on the unstampedagreement and the documents being proved is reasoned and properwarranting no interference as there is also a registered mortgagesigned by the Petitioner admitting the availment of loan.32.He would further submit that there can be no discharge ofguarantor considering the convenants of personal guarantee. Hewould submit that the statement of accounts was duly certified andtherefore there were no necessity of leading evidence to proveamounts claimed in the statement of claim.sa_mandawgad18 of 36 carbp 843-24+(2).doc33.He submits that appointment of an administrator does notresult in invalidating earlier Acts and Resolutions of the Bank. Hesubmits that the issues which are now being raised by the Petitionerin the present petition were not at all raised during the arbitrationand therefore cannot be considered by this Court under Section 34 ofthe Arbitration Act.34.He submits that insofar as Monica Mulay is concerned, there isno fresh deed of guarantee  taken after restructuring, however, herguarantee was continuing guarantee and she did not ask for releaseand the Bank has not specifically released the guarantee. He submitsthat insofar as the stamping of deed of guarantee is concerned, as thedocument says that the payment will be made on demand, the same isin the nature of promissory note. He submits that the stamp duty waspaid on the loan agreement which was the principal document. 35.In rejoinder, Mr. Totala would submit that there is noanswer to the moratorium qua the debt or on the aspect of nonarbitrability on issues of mortgage. He submits that the submissionbefore the Learned Arbitrator that the deed of guarantee was innature of indemnity in which case loss will have to be proved. Hesubmits that different contentions were raised but the Awards arecopy pasted.sa_mandawgad19 of 36 carbp 843-24+(2).docREASONS AND ANALYSIS:36.Mr. Totala has mounted a multi pronged attack on theimpugned Awards assailing each and every finding of the LearnedArbitrator including seeking factual appraisal. Section 34(2)(a) of theArbitration Act enumerates the specific grounds on which thearbitration award can be set aside by the Court. Section 34(2)(b)provides that the award may be set aside if the subject matter of thedispute cannot be settled by arbitration as per applicable law or thearbitral award is in conflict with public policy of India. Explanation Iclarifies the eventualities in which an arbitral award can be said to bein conflict with the public policy i.e. if (a) it’s making is induced byfraud, corruption or in violation of Section 75 or Section 81 ofArbitration Act, (b) when it is in contravention of fundamental policyof India law or (c) when it conflicts with the most basic notions ofmorality or justice. Explanation II provides that no review on themerits shall be undertaken when determining a contravention offundamental policy of Indian Law. Section 34(2A) introduced byAmendment Act of 2016 provides an additional ground of patentlyillegality appearing on the face of the Award for setting asidedomestic Award. The proviso clarifies that the award shall not be setaside merely on the  ground of erroneous application of the law or byre-appreciation of evidence.sa_mandawgad20 of 36 carbp 843-24+(2).doc37.The impugned Awards are challenged broadly on the followinggrounds:(a)conduct of arbitration proceedings despite themoratorium imposed under IB Code by disregarding thejudicial pronouncements.(b)violation of principles of natural justice by refusing leaveto cross examine the Banks’ witness.(c)finding of proof of claim based on unverified andunproved forged documents which are unstampedagreements.(d)contravention of provisions of The Indian Contract Act,1872 which discharges guarantor upon material alterationof the contract without consent of surety.(e)patent illegality as no evidence led by Bank to prove thedebt as claimed and failure to consider that by reason ofcancellation of license of the Bank on 24th November,2023, the witness had no authority to file evidence onbehalf of the Bank. (f)absence of jurisdiction as Petitioners are not members ofthe Bank.(g)adjudication of matters inherently non arbitrable byissuance of directions contained in clauses (D), (E) and (F)of operative part of the impugned Awards.(h)non application of mind evident from copy pasted reasonsin the impugned awards.(i)Non framing of issues and conduct of two separatearbitration proceedings simultaneously without consentof parties at head office of Bank despite the Petitionersresiding at Aurangabad. sa_mandawgad21 of 36 carbp 843-24+(2).doc(j)Non compliance with Section 12 of the Arbitration Act asthe disclosure is defective. 38.In Ssangyong Engineering and Construction Company Ltd. vsNational Highway Authority of India (NHAI)22, the Hon’ble ApexCourt considered the scope of interference pre and post 2015amendment to the Arbitration Act. It held that the expression “publicpolicy of India” contained in Section 34 would now mean the‘fundamental policy of Indian law as explained in paragraph 18 and 27of Associate Builders vs. Delhi Development Authority23. Paragraph27 of Associate Builders (supra) holds that the binding effect of thejudgement of superior court being disregarded would be equallyviolative of the fundamental policy of Indian law. 39.The principal borrower in Arbitration Case No No.2065 of 2022was M/s. Nirmangold Plasttech Private Limited whereas in ArbitrationCase No.2064 of 2022, the principal borrower was M/s. NirmangoldAlloys Private Limited which was admitted to insolvency and wasundergoing corporate insolvency resolution process under the IBCode.40.Two of the guarantors i.e. Bhushan Pundlikrao Patil and AnitaBhushan Patil claimed benefit of the interim moratorium underSection 96 of IB Code premised on filing of Petitions under Section 94of the IB Code for personal insolvency. Under the statutory provisions22(2019) 15 SCC 13123(2015) 3 SCC 49sa_mandawgad22 of 36 carbp 843-24+(2).docof IB Code, the filing of applications under Section 94 of IB Codetriggers an interim moratorium in relation to all the debts from thedate of filing of the application and during the interim moratoriumany legal action or proceeding pending in respect of any debt shall bedeemed to have been stayed.41.The Learned Arbitrator accepted the imposition of statutorymoratorium and stayed the arbitration proceedings qua Bhushan Patiland Anita Patil, however, continued the proceedings as against theother guarantors including the Petitioners. Mr. Totala has pointed outthat upon earlier application of Bhushan Patil being dismissed, a freshapplication was filed by him. The position of law which has beensettled by judicial pronouncements of this Court as well as theHon’ble Apex Court in the context of interim moratorium underSection 96 of IB Code is that the moratorium is imposed on the debtand not the debtors. The filing of the personal insolvency applicationsextends the benefit of moratorium not only to the applicants but hasthe effect of keeping all the debts in abeyance. 42.In Tata Capital Ltd. vs. Geeta Passi and Anr. (supra), thePetition therein challenged the order of Learned Arbitrator which hadkept in abeyance the proceedings in view of the moratorium underSection 96 of IB Code. In the facts of that case, the Arbitrator stayedthe arbitration proceedings against the proprietor and one of thesa_mandawgad23 of 36 carbp 843-24+(2).docguarantor. The other guarantors filed an application seekingindefinite stay in view of Section 96(1)(b)(i) of IB Code, which came tobe allowed.  This Court considered the statutory definition of “debt” under IB Code. It held that the expression “any person” used indefining “debt” would mean that no distinction can be drawn betweenprincipal borrower or guarantor. It further held that when Section 96speaks of moratorium in respect of “any debt”, the same would meanthe entire debt irrespective from whom it is due.43.The Learned Single Judge noted the decision of Hon’ble ApexCourt in the case of State Bank of India Vs. V. Ramkrishnan andAnr.24, which had distinguished the moratorium as contemplatedunder Sections 14 and 96 of the IB Code to hold that protection ofmoratorium under Section 96 is greater than that of Section 14, inthat pending legal proceedings in respect the “debt” and not thedebtor are stayed and as such moratorium is in respect of debt andnot the debtor. The Learned Single Judge of this Court held inparagraph 10 and 12 as under:“10.Once this is so, then when the National Company LawTribunal granted a moratorium under section 96 of theInsolvency and Bankruptcy Code in favour of Mr. Tarun Kapoorwho was the principal borrower being the proprietor of SMC andMrs. Pavan Kapoor, being the guarantor, the same will have to beconstrued as a moratorium in respect of the entire "debt". It isthe "debt",and its entitlement which has been claimed to be put24(2018) 17 SCC 394sa_mandawgad24 of 36 carbp 843-24+(2).docbefore the learned arbitrator, for decision, in the arbitrationproceedings. The claim does not make any distinction between a"debt" ,vis-a-vis Mr. Tarun Kapoor as a principal debtor, or theother parties thereto as the guarantors or even considering theircoextensive liability. The "debt",is the debt of SMC/Tarun Kapooras principal borrowers as well as of the guarantors. The "debt",for the purpose of the moratorium, cannot be severed into the"debt" of the principal borrower or for that matter of one of theguarantors on the one hand, and the debt of the otherguarantors, in this case the legal heirs of original respondent No.4, Mr. B.L. Passi. Though it can be said that the liability of originalrespondent No. 4, late Mr. B.L. Passi, was co-terminus with theprincipal borrower and the other guarantors, the liability of thepresent respondents, would be restricted to the assets of lateShri B.L. Passi, to the extent to which they would inherit thesame. Be that as may, a distinction cannot be carved out, inrespect of the "debt",award in respect of which is claimed in thearbitration proceedings, for the purpose of continuation of thearbitral proceedings, between the liability of the principalborrower/guarantor who have been granted a moratorium andthe others who have not approached the National Company LawTribunal, as the word "debt",as used in section 96 of the NationalCompany Law Tribunal, has to be held to be the "debt", in itsentirety and not otherwise. (Emphasis supplied) 12.It is also necessary to note that there is no provision in theArbitration and Conciliation Act, 1996 for splitting up ofarbitration proceedings, by conceiving of a situation of thearbitration proceedings being stayed against some of the partiesand going ahead against some. The arbitration proceedings willhave to be decided in their entirety against all the parties and theentitlement of the claimant and the liabilities of the respectiverespondents, will be determined on the basis of evidence whichmay be led therein, which cannot be on a piecemeal basis.”44.In the case of Dilip B. Jiwrajka Vs. Union of India25, , theHon’ble Apex Court considered the impact of moratorium under25(2024) 5 SCC 435sa_mandawgad25 of 36 carbp 843-24+(2).docSection 14 versus the interim moratorium under Section 96 ofArbitration Act. The Hon’ble Apex Court held that the crucial wordswhich are used in clause (b)(i) and (ii) of Sub-section (1) of Section 96are “in respect of any debt” as opposed to a debtor and that Clause (b)of Sub-section (1) indicates that the purpose of interim moratorium isto restrain the initiation or the continuation of legal action orproceedings as against the debt. The Hon’ble Apex Courtcontradistinguished the provisions of Section 96 from Section 14 of IBCode to hold that the protection mandate of Section 96 of theInsolvency and Bankruptcy Code is therefore in respect of ‘debt’ andnot the debtor. 45.The continuation of the arbitration proceedings by the LearnedArbitrator against the Petitioners despite the interim moratoriumimposed qua the debt constitutes grant of relief in respect of anpresently unenforceable debt. It is settled that the expression“fundamental policy of Indian law” must amount to breach of somelegal principle or legislation which is so basic to Indian law that it isnot susceptible of being compromised. It refers to the principles andlegislative policy on which Indian statutes and laws are founded andconnotes the basic and substratal rationale, values and principleswhich form the bedrock of laws in our country. (See Vijay Karia andsa_mandawgad26 of 36 carbp 843-24+(2).docOrs. vs Prysmian Cavi E Sistemi SRL and Ors.)2646. The impugned Awards resulting in enforcement of debt, whichby reason of the statutory interdict is incapable of being enforcedalbeit temporarily, runs contrary to the fundamental principles ofIndian law which recognises enforcement of laws in respect of legallyenforceable debts. The impugned Awards disregard the bindingjudicial pronouncements of this Court as well as the Hon’ble ApexCourt, are violative of fundamental policy of Indian law and are liableto be set aside under Section 34(2)(b)(ii) of Arbitration Act. 47.The other ground on which the impugned Awards cannot besustained is the violation of principles of natural justice by refusingthe Petitioners the right to cross examine the Bank’s witness. 48.The Bank led the evidence of its witness by filing Affidavit ofEvidence and application came to be filed by the Petitioners seekingpermission to cross examine the witness. The Learned Arbitrator hasgone into the sufficiency of reasons for cross examination to rejectthe application and has held that the burden is upon the Petitioners toprove the defence.49.Section 18 of Arbitration Act provides that the parties shall betreated with equality and each party shall be given a full opportunityto present his case. Section 24 of Arbitration Act provides that in26(2020 11 SCC 1)sa_mandawgad27 of 36 carbp 843-24+(2).docabsence of an agreement between the parties, the arbitral tribunalshall decide whether to hold oral hearings for the presentation ofevidence or for oral argument or whether the proceedings shall beconducted on the basis of documents and other materials. The provisoto Section 24(1) of the Arbitration Act provides that the arbitralTribunal shall hold oral hearings on a request by a party.50.In Sukhbir Singh vs Hindustan Petroleum Corporation Ltd.(supra), the Delhi High Court considered the challenge to thearbitration award on the ground of failure to permit crossexamination. After examining the statutory scheme of Section 24 ofArbitration Act, the Delhi High Court held in paragraph 44 as under:“44. From the aforesaid materials, and upon an interpretationof Section 24 consistent with the requirements of naturaljustice, I am of the view that the first proviso to Section 24(1)requires a party’s request for oral hearings at the stage ofevidence or arguments to be granted. Unless the right torequire oral evidence or oral arguments have been waived by aprior agreement to the contrary between the parties, theproviso to Section 24(1) expresses a legislative preference forthe grant of oral hearing at the request of either party….”51.The provisions of Section 24 vesting discretion in the ArbitralTribunal to decide the manner of conduct of proceedings is subject tothe request by a party seeking oral hearing. Even accepting thediscretion vested in the Arbitral Tribunal, in the present case, theLearned Sole Arbitrator had permitted the Bank to lead evidence andsa_mandawgad28 of 36 carbp 843-24+(2).docthus the decision was to hold oral hearings. The principle of equaltreatment mandates the liberty of cross examination to the oppositeparty. Equally important was the right of cross examination as theLearned Arbitrator based on the evidence of the Bank’s witness andthe documents produced by the witness, has rendered a finding ofthe Bank’s claim being proved. The Learned Arbitrator after rejectingthe Petitioner’s application has observed that the Petitioners had notled evidence and treated the written statement as evidence. 52.In the written statement, there are specific denials to theexecution of the letters of guarantee/demand promissorynote/undertaking etc. and plea of the documents being forged. TheLearned Arbitrator has compared the signatures on the admitteddocuments to hold that the documents have been executed by thePetitioners.53.The impugned Awards shows that the Learned Sole Arbitratorhas arrived at a finding that (a) in view of the evidence of the Bank’switness, the documents are proved, (b) comparison of the Petitioners’admitted signatures with the signatures on the documents shows thatthe documents were executed by the Petitioners and (c) the contentsof the documents show due execution by the Petitioners.54.The finding of proof of claim was interlinked with the proof ofexecution of the documents by the Petitioners. Mr. Totala hassa_mandawgad29 of 36 carbp 843-24+(2).docsubmitted that the original documents were not even produced onrecord, which has not been disputed by Mr. Punalekar. It is evidentthat the execution of documents by the Petitioners was contestedfact which required oral evidence and the Petitioner’s request forcross examination of the witness was reasonable. The LearnedArbitrator while rejecting the application has held that the Petitionersare required to prove their defence. One of methods of proof of thedefence is cross-examination of the Banks’ witness. 55.The Hon’ble Apex Court in the case of M/s. Narinder Singh andSons vs. Union of India (supra), has held that the lack of fullopportunity as envisaged by Section 18 of the Act impedes a fair andjust decision and had consequently set aside the Award in terms ofclause (iii) to Section 34(2)(a) as well as clause (ii) to Section 34(2)(b)of Arbitration Act.56.Under Section 18 of the Arbitration Act, the parties have to begiven a full opportunity of presenting its case. The right of crossexamination is an integral aspect of audi alteram partem rule. Therefusal of permission for cross examination violates the right of fairhearing and equal treatment making out a ground under Section 34(2)(a)(iii) of Arbitration Act. 57.The impugned Awards hold the Bank’s claim to be proved byrelying on the evidence adduced by the Bank. The refusal ofpermission to cross examine the Bank’s witness renders the findingssa_mandawgad30 of 36 carbp 843-24+(2).docarrived at by the Learned Arbitrator qua the evidence patently illegalbeing a decision based on no evidence. The impugned Award is thusliable to be set aside under Section 34(2-A) of Arbitration Act. 58.In so far as the challenge on the ground of discharge of suretyby reason of variance in terms of contract by restructuring/enhancement of credit facilities is concerned, the Learned Arbitratorhas  held that the guarantee executed by the Petitioners gave consentfor making any variance, change or modification as the Bank may thinkfit and thus held that there was waiver of all the rights available underSections 133, 134, 135, 139 and 141 of Indian Contract Act, 1872.59.The question as to whether the Petitioners had agreed to waivetheir rights is required to be considered in the context of terms contained in the deed of guarantee. The Learned Arbitrator hasexamined the terms of the guarantee to hold that there is waiver. Anexamination into the aspect of terms of the guarantee would involvefactual appraisal and merit based review of the Awards, which isimpermissible. It also needs to be borne in mind that merecontravention of substantive law of India does not afford a groundunder Section 34 of Arbitration Act. 60.The finding of the Learned Arbitrator on the issue ofinsufficiency of stamps on the mortgage deed and letters ofguarantee is based on the provisions of of Section 4 of theMaharashtra Stamps Act, which governs the stamp duty for singlesa_mandawgad31 of 36 carbp 843-24+(2).doctransaction completed using multiple instruments and provides forpayment of full duty only on primary document while the ancillarydocuments incurred on nominal stamp duty. The Learned Arbitratorhas noted that the provisions grant liberty to the parties to determinefor themselves which of the instruments so employed shall bedeemed to be the principal instrument and it is not the contentionthat such liberty has not been availed. 61.An inquiry into the insufficiency of the stamps on thedocuments would entail an inquiry into the issue as to which is theprincipal document and whether the same has been duly stamped,which enters into the realm of fact finding inquiry. Such an inquiry notconducted before the Learned Arbitrator cannot be permitted to beconducted under Section 34 of Arbitration Act. 62.The objection to jurisdiction was premised on the ground thatthe Petitioners are not members of the Respondent No.1-Bank. Thelearned Arbitrator has considered the affidavit of evidence filed bythe Respondent No.1-Bank to hold that the Petitioners have becomemembers of the Disputant-Bank as the relevant application forms forthe membership of the Disputant Bank duly signed by the Petitionersalong with the personal information are placed on record. TheLearned Arbitrator is the master of the quality and quantity ofevidence and this Court cannot go into the adequacy of the evidencesa_mandawgad32 of 36 carbp 843-24+(2).docor re-appreciate the findings to substitute its own view. The Bank hasplaced documentary evidence on record which has been consideredby the Learned Arbitrator to render a finding about the Petitioner’smembership, which cannot be interfered in view of limited scope ofinterference under Section 34 of Arbitration Act. 63.The contention as regards failure to provide true and correctdisclosure under Section 12 of the Arbitration Act as a ground ofchallenge must be shown to fall within the exhaustive and codifiedstatutory framework of Section 34 of Arbitration Act. If the incorrectdisclosure hides a conflict of interest, the same would createjustifiable doubts about the Arbitrator’s impartiality. It needs to benoted that the present case is of statutory arbitration and theLearned Sole Arbitrator has been appointed by the Commissioner ofCo-operation and Registrar of Co-operative Societies. Theappointment is challenged as being hit by Entry 24 of Schedule V ofthe Arbitration Act. The Learned Arbitrator has considered thedecisions of this Court holding that the mere fact that the Arbitratoris appointed under Section 84 of MSCS Act in more than 3 arbitrationis not a ground to create doubt about its independence andimpartiality. I do not find any case made out under Section 34 ofArbitration Act to set aside the impugned Awards on this ground.  64.The impugned Awards declare the subsistence of the Bank’ssa_mandawgad33 of 36 carbp 843-24+(2).doccharge over the mortgaged properties and permits the disposal of themortgaged property for recovery of the dues. It further  injuncts thePetitioners from creating third party rights in respect of themortgaged/hypothecated properties and directs the attachment ofthe properties till sale and realisation thereof.  These directions havebeen assailed as being non arbitrable.  By the said directions theLearned Sole Arbitrator has directed enforcement of the mortgage bysale. The Hon’ble Apex Court has held in Booz Allen and HamiltonInc. vs SBI Home Finance Ltd. (supra) that the enforcement of right ofmortgage is enforcement of right in rem, which will have to bedecided by the Courts of law and not by Arbitral Tribunals.65.The said directions  cannot be said to be ancillary reliefsgranted and disregards the binding effect of the decision of Hon’bleApex Court in Booz Allen and Hamilton Inc. vs SBI Home Finance Ltd.(supra). 66.In so far as the awards being copy pasted, the Petitioners hadraised substantially common defences and resultantly, the findingsare identical. I am also not inclined to consider the other issue as toconduct of both the proceedings simultaneously which does not fit inthe scheme of statutory challenge under Section 34 of Arbitration Act.In so far as the leading of evidence by the witness in absence ofauthorisation, no such objection was raised before the LearnedArbitrator. sa_mandawgad34 of 36 carbp 843-24+(2).doc67.In light of the above discussion, the conclusion is summarised asunder:(a)The continuation of the arbitration proceedings againstthe Petitioners despite the stay of “debt” under Section96 of IB Code on the applications filed by the otherguarantors disregards the binding judicialpronouncement of Hon’ble Apex Court and this Court andis violative of fundamental policy of Indian law underSection 34 (2)(b)(ii) of Arbitration Act.(b)The refusal of opportunity of cross examination to thePetitioners violates the principles of natural justice andSection 18 and Section 24 of Arbitration Act. Resultantlythe impugned Awards are liable to be set aside underSection 34(2)(a) (iii) of Arbitration Act. (c ) An examination into the aspect of terms of the guaranteewould involve factual appraisal and merit based review ofthe Awards, which is impermissible. A mere contraventionof substantive law of India does not afford a groundunder Section 34 of Arbitration Act.(d) The findings of the Arbitral Tribunal on the sufficiency ofstamp duty requiring factual appraisal cannot be goneinto by this Court under Section 34 of Arbitration Act. (e)The findings of Arbitral Tribunal that the Bank’s claimstands proved is based on no evidence and suffers frompatent illegality under Section 34 (2-A) of Arbitration Act. sa_mandawgad35 of 36 carbp 843-24+(2).doc69. In view of the above, the Petitions succeed. The impugnedAwards dated 12th February, 2024 passed in ARB/ACB/VNL/2065 of2022 and in ARB/ACB/VNL/2064 of 2022 are hereby quashed and setaside.[Sharmila U. Deshmukh, J.]sa_mandawgad36 of 36