Recovery of Debts Due to Banks and Financial Institutions Act, 1993 – Section 19 – Arbitration and Conciliation Act, 1996 – Sections 9 & 11- Application for appointment of an arbitrator at the instance of a borrower – proceeding under RDB Act is pending before the Debt Recover Tribunal – Held, If the petitioner instead of filing an application under Section 9 could have filed a suit prior to initiation of recovery proceeding which would be otherwise maintainable there is no reason to conclude that the application for appointment of arbitration in terms of the arbitration clause in the agreement would be barred. Moreover, the application under Section 9 was filed prior to the filing of the recovery proceeding and the respondent has participated in such proceeding and has received substantial benefits in terms of the orders passed in such proceeding. In an application under Section 11 the Court is required to find out if there is existence of a valid arbitration clause. In view of a clear finding that there is an arbitration agreement between the parties and the party has approached the appropriate High Court, the application under Section 11 of the Arbitration and Conciliation Act is allowed.
ORIDINARY ORIGINAL CIVIL JURISDICTION
THE HON’BLE JUSTICE SOUMEN SEN
Judgment On : 2nd August, 2016
A.P. No. 6 of 2016
AMRIT JAL VENTURES PRIVATE LIMITED
SREI INFRASTRUCTURE FINANCE LIMITED
For the petitioner : Mr. Abhrajit Mitra, Sr. Adv. Mr. Jishnu Chowdhury, Adv. Mr. Abhijit Sarkar, Adv. Mr. Aritra Basu, Adv. Ms. A. Chatterjee, Adv. Mr. Ratul Das, Adv. Mr. Abhik Chitta Kundu, Adv. For the respondent : Mr. Ratnanko Banerjee, Sr. Adv. Mr. Swatarup Banerjee, Adv. Mr. Shaunak Mitra, Adv. Ms. Dwidhita Bhaduri, Adv.
Soumen Sen, J.:- The initiation of an arbitration proceeding on the basis of an arbitration clause in an agreement by appointment of an arbitrator at the instance of a borrower when a proceeding under
Section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993
(hereinafter referred to as the “RDB Act”) is pending before the Debt Recover Tribunal, is the central issue in this application for appointment of an arbitrator.
The respondent contends that the recovery of RDB Act is a special statute and all disputes coming within the purview of the said Act can only be adjudicated by a Tribunal duly constituted under the RDB Act.
Mr. Abhrajit Mitra, learned Senior Counsel appearing on behalf of the petitioner submits that the parties have voluntarily agreed to have all there disputes and differences adjudicated by way of arbitration and in view of
Sections 5 and 8 of the Arbitration and Conciliation Act, 1996
the Tribunal is precluded from proceeding with the application filed by the Bank under Section 19 of the RDB Act. It is submitted that although in the event it is contended and held that Section 5would not apply to a proceeding before the Tribunal even then by reason of an agreement between the parties, the bank cannot resile from having the said dispute adjudicated by arbitration. It is submitted that the parties have voluntarily agreed to have their disputes resolved through arbitration notwithstanding the introduction of the 1993 Act and the Bank having agreed to such procedure and mode of adjudication has consciously abandoned and/or waived its right to claim an adjudication otherwise then by way of an arbitration.
The learned Senior Counsel has relied upon the decision of Co-ordinate Bench in HDFC Bank Ltd. Vs. Bhagwandas Auto Finance Limited & Anr., a Division Bench judgment dated 21st January, 2011 (Bhagwandas Auto Finance Ltd. & Ors. Vs. H.D.F.C. Bank Ltd.) affirming view expressed by the learned single Judge and a Full Bench Decision of the Delhi High Court in
HDFC Bank Ltd. Vs. Satpal Singh Bakshi reported at 2013 (134) DRJ 566 (FB)
It is submitted that the right of a constituent to file a suit notwithstanding the RDB Act, 1993 is not affected by the RDB Act and in this regard the learned Senior Counsel has relied upon a decision of the Hon’ble Supreme Court in
Nahar Industrial Enterprises Limited Vs. Hong Kong and Shanghai Banking Corporation reported at (2009) 8 SCC 646
Indian Bank Vs. ABS Marine Products (P) Ltd. reported at (2006) 5 SCC 72
Mr. Mitra has referred to Paragraphs 105-111 of Nahar Industrial Enterprises Ltd. (supra) in support of the submission that the right of the debtor to maintain an action in the Civil Court is not barred notwithstanding the enactment of RDB Act, 1993. Similarly, the petitioner as constituent is also entitled to invoke the arbitration clause and seek remedy by arbitration.
It is submitted by Mr. Mitra, the learned Senior Counsel, that the arbitration proceeding has commenced prior to the institution of the proceeding by the bank before the Debt Recovery Tribunal. It is submitted that an application under Section 9 of the Arbitration and Conciliation Act, 1996 was filed on 19th August, 2015 being AP No.1364 of 2015. The bank filed an application for recovery of proceeding under Section 19 of the RDB Act, 1993 on 16th October, 2015. The notice for commencement of the arbitration proceeding under Section 21 was issued by the petitioner on 24th November, 2015. In between several orders were passed by this Court in the Section proceeding by and under which payments were made by the petitioner and accepted by the HDFC Bank. Mr. Mitra submits that the learned single Judge after receiving the benefit under several orders passed in the said proceeding, a failed attempt was made by the respondent to argue that the appearance of the respondent in the said proceeding is without breach to its right in respect of the claim carried to the Debts Recovery Tribunal. The learned Senior Counsel has submitted that the said objection did not find favour with the Co-ordinate Bench as the respondent submitted to the arbitration in unequivocally participating in proceeding before this Court on 1st September, 2015 and October 9, 2015 and particularly in enjoying the benefit of substantial payment under the consent order of September 1, 2015.
Per Contra, Mr. Ratnanko Banerjee, the learned Senior Counsel appearing on behalf of the Bank submits that although there may be an arbitration agreement between the parties but having regard to Section 34 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, 1993 and Section 34 of the Securitisation and Reconstruction of Financial Assets andEnforcement of Security Interest Act, 2002, (hereinafter referred to as the “SARFAESI Act”) such arbitration clause is invalid and unenforceable. It is submitted that in view of the aforesaid legislations, the bank and/or a financial institution can recover money and/or enforce its security interest only by invoking the provisions under the said two Acts and not by any other means, meaning thereby that no other remedy is available to the Bank except in taking recourse to the provisions of the said two Acts. Mr. Banerjee has laid much emphasis on Section 34 of the SARFAESI Act, 2002 in order to impress upon this Court that the phrase ‘any action taken or to be taken’ in the said Section debars any authority including an arbitrator to adjudicate upon the disputes if the nature of the dispute falls within the jurisdiction of the Debt Recovery Tribunal.
It is submitted that by reason of Sections 17, 18 and 34 of the RDB Act, 1993 read with Section 34of the SARFAESI Act, 2002, there has been a complete ouster jurisdiction to decide the dispute raised by the respondent and such dispute can only be decided by the Debt Recovery Tribunal constituted under the RDB Act. The aforementioned Sections are as follows:-