HDFC BANK LTD Vs. SATPAL SINGH BAKSHI

JUDGEMENT

(1.) THIS writ petition is filed by the HDFC Bank Limited (hereinafter referred to as the bank) questioning the validity of orders dated 9 th March, 2011 passed in Appeal No.116/2011 by the Debt Recovery Appellate Tribunal, Delhi (DRAT for short) which had confirmed the orders dated 8 th October, 2010 passed by the Debt Recovery Tribunal � II (DRT-II for short) in OA 178/2009. The bank had filed OA before the DRT for recovery of the outstanding amount against the loan disbursed to the respondent and in this OA, the respondent herein had filed application under Section 8 of the Arbitration and Conciliation Act, 1996 ("Arbitration Act") on the ground that Clause 14.7 of the loan agreement provided for adjudication of disputes through arbitration by a sole arbitrator and, therefore, the respondent prayed for stay of the proceedings of the OA. THIS application was allowed by the Presiding Officer vide order dated 8 th October, 2010 holding that once there was an arbitration agreement between the parties, provisions of the Arbitration Act as contained in Section 8 of the Arbitration Act would prevail over the Recovery of Debts due to Banks and Financial Institutions Act, 1993 ("RDB Act"). The DRT, thus, dismissed the OA as not maintainable giving liberty to the bank to refer the matter to the arbitration as per law. The bank went in appeal but this order is maintained by the DRAT dismissing the appeal in limine. The present writ petition is filed against the aforesaid orders.

(2.) IT is clear from the brief description of the factual matrix noted above that the core issue is which of the two enactments, namely, Arbitration Act and RDB Act is to prevail over the other. The Division Bench has framed this legal question in the following format:

(3.) THERE is no doubt that those matters which are covered by the RDB Act and are to be adjudicated upon by the Debt Recovery Tribunal/ Debt Recovery Appellate Tribunal, jurisdiction of civil courts is barred. Up to this point, we are in agreement with the learned counsels. However, the answer to the question posed before us does not depend upon the aforesaid principle. That principle only ousts the jurisdiction of civil courts. Focus of the issue, however, has to be somewhat different viz. even when a special Tribunal is created to decide the claims of banks and financial institutions of amounts more than Rs.10 Lakhs, can the parties by mutual agreement still agree that instead of the Tribunal constituted under the RDB Act, these disputes shall be decided by the Arbitral Tribunal. If answer to this question is in the negative, then those submissions made by the counsels shall prevail. On the other hand, if we find that it is permissible for the parties, by agreement, to agree for domestic forum of their own choice, namely, Arbitral Tribunal under the Arbitration Act to deal with such claims, then the edifice of the apparent forceful submissions of Mr. Tripathi would collapse like house of cards as all those submissions would be relegated to the pale of insignificance.