Co-operative Bank Can Initiate Arbitration Without Specific Managing Committee Authorisation: Kerala High Court

The Kerala High Court has held that a co-operative society's failure to produce a Managing Committee resolution before the Arbitrator does not invalidate arbitration proceedings initiated by the society.

The court ruled that the requirement under Rule 67(2) of the Kerala Co-operative Societies Rules, 1969, is directory and not mandatory

“However, I am of the opinion that, though the word 'shall' is used in Rule 67(2) of the 1969 Rules, the provision cannot be construed as mandatory, and it can only be held to be directory. Thus, the failure to produce a resolution before the Arbitrator cannot be fatal to the arbitration proceedings initiated by the Society. It is settled law that the use of the word 'shall'' in a statutory provision does not by itself indicate that the provision is mandatory, and the word 'shall' in suitable circumstances may be read as directory and not mandatory, especially when the provision is procedural.”, it ruled.

Justice Gopinath P. made the ruling while dealing with a challenge by a borrower's wife and son to arbitration proceedings initiated by Mayyanad Regional Co-operative Bank No. 94.

The dispute arose after Mary Manoja and her late husband Wazhson availed credit facilities from the Bank.

Following a default, Mayyanad Regional Co-operative Bank initiated proceedings under Section 69 of the Kerala Co-operative Societies Act, 1969. The Arbitrator awarded ₹21,27,842 against Mary and her late husband Wazhson, with 16% future interest.

Mary's appeal was dismissed by the Kerala Co-operative Tribunal on April 8, 2025 as time-barred. She and Wazhson's legal heir Antony then approached the High Court, challenging the arbitration proceedings and the Tribunal's order.

They argued that the plaint was filed before the Bank's May 6, 2021 authorisation and that the resolution did not cover Mary. The High Court rejected the challenge, holding that the Secretary could initiate proceedings and that Rule 67(2)'s resolution requirement was directory.

However, the Court found that the award had not been properly communicated under Rule 68. It therefore set aside the Tribunal's order and restored Mary's appeal for decision on merits

The court further barred the petitioners from raising before the Tribunal any contention concerning the Managing Committee resolution, as that issue had already been decided against them.

For Petitioners (Antony Wazhson and Mary Manoja): Advocate R. Kishore.

For Respondent (Mayyanad Regional Co-operative Bank No.94): Advocates V. Jayapradeep, O.A. Nuriya, D.S. Lokanathan, Alan Priyadarshi Dev and Sajeena Abdu T.K.