The Delhi High Court has held that arbitration between co-operative society and member would be determined by S. 85(1) and not the Limitation Act.

In the present case of Najmus Sehar v. M/S Bombay Mercantile Coop Bank & Ors., an appeal was brought under the Arbitration and Conciliation Act, 1996 against the impugned Order rejecting an objection under Section 34. Respondent no. 2 had availed a loan for Rs. 2,90,000/- from the Respondent no. 1 co-operative bank for the purchase of a new car. Respondent no. 2 defaulted on the loan and with interest, the liability rose to a sum of Rs. 10,11,640/-.

The Respondent Bank invoked arbitration proceedings against the Respondent no. 2 which culminated in an ex-parte award dated 08.05.2018.

The Appellant contended that the loan having been advanced on 14.01.1998, reference to the arbitral tribunal was time-barred. The Delhi HC stated that where a dispute related to recovery of money including interest payable to a co-operative society by its member, the period of limitation for referral to arbitration would be computed from the date on which the member dies or ceases to be a member of the society. This is notwithstanding anything contained in the Limitation Act. The Bench also went into the reasons behind this section: This was done to ensure nurturing of the bond between the co-operative society and its member till death of the member or cessation of his membership, coupled with the upkeep of fiduciary interest of the co-operative society. They discussed the National Policy on Co-operatives framed by the Government of India.

Therefore, Section 85(1)(a) of the MCS Act carves out an extraordinary niche out of the general law of limitation. The Court held that period for referral of dispute to arbitration would be governed by Section 85(1)(a)  of the Act and not by the provisions of the Limitation Act.