KOHINOOR CREATIONS Vs. SYNDICATE BANK

JUDGEMENT

(1.) Which of the two acts would prevail. Would the provisions of Arbitration and Conciliation Act, 1996 override those of Recovery of Debts due to Banks and Financial Institutions Act, 1993 (RDB Act) is the interesting question raised in this petition. Petitioner No.1 is the principal borrower and petitioner Nos.2 to 5 are its guarantors. Petitioner No.1 executed an export credit agreement with respondent Bank to which other petitioners were not parties. The agreement contained the following arbitration clause:-

(2.) Petitioner No.1 allegedly committed breach of agreement by defaulting in payment of dues and respondent filed a recovery application for recovery of these before the DRT against all the petitioners. While contesting this application petitioners filed an application under Section 8 of the Arbitration and Conciliation Act, 1996 invoking the arbitration clause and sought stay of the proceedings before the DRT sine die and also prayed that their written statement be kept in abeyance. They disputed their liability and alleged that statement of accounts filed by respondent bank was incorrect. They significantly omitted to seek any reference of dispute to arbitrator but their application was labelled under Section 8 of the Arbitration Act nonetheless.

(3.) The DRT summarily rejected petitioners application by order dated 6.8.2001 on the ground that provisions of Arbitration Act were not applicable to the proceedings before the DRT and declined to stay the proceedings.