TMI Blog2012 (9) TMI 1143X X X X Extracts X X X X X X X X Extracts X X X X ..... rability ' has different meanings in different contexts. The three facets of arbitrability, relating to the jurisdiction of the arbitral tribunal; (i) whether the disputes are capable of adjudication and settlement by arbitration? That is, whether the disputes, having regard to their nature, could be resolved by a private forum chosen by the parties (the arbitral tribunal) or whether they would exclusively fall within the domain of public fora (courts). (ii) Whether the disputes are covered by the arbitration agreement? That is, whether the disputes are enumerated or described in the arbitration agreement as matters to be decided by arbitration or whether the disputes fall under the 'excepted matters' excluded from the purview of the arbitration agreement. (iii) Whether the parties have referred the disputes to arbitration? That is, whether the disputes fall under the scope of the submission to the arbitral tribunal, or whether they do not arise out of the statement of claim and the counter claim filed before the arbitral tribunal. A dispute, even if it is capable of being decided by arbitration and falling within the scope of arbitration agreement, will ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion where such an arbitration agreement becomes one sided agreement, namely, to be invoked by the bank alone at its discretion without giving any corresponding right to the respondent to have the benefit thereof. Therefore, we find that orders of authorities below are without blemish. Finding no merit in this writ petition, the same is dismissed. However, since nobody had appeared on behalf of the respondent, we are not imposing any costs. - Hon'ble The Acting Chief Justice Hon'ble Mr. Justice Sanjay Kishan Kaul And Hon'ble Mr. Justice Rajiv Shakdher A.K. Sikri (Acting Chief Justice): For the Petitioner : Mr. Punit K. Bhalla, Ms. Chetna Bhalla, Advocates For the Respondent : Mr. Parag P. Tripathi, Amicus Curiae with Mr. Anuj Bhandari, Advocate ORDER 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 8th October, 2010 passed by the Debt Recovery Tribunal - II (DRT-II for short) in OA 178/2009. The bank had filed OA befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioner has referred to a judgment of Division Bench of this court in Kohinoor Creations and Ors. Vs. Syndicate Bank 2005 (2) ARBLR 324 Delhi wherein it has been inter alia held that in view of the provisions of section 34 of the RDB Act, the provisions of the Arbitration Act stand excluded. In coming to this conclusion, specific emphasis is laid on sub-section (2) of Section 34 of the RDB Act. Section 34 of the RDB Act reads as under:- 34. Act to have over-riding effect- (1). Save as otherwise provided in sub-section(2), the provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law other than this Act. (2). The provisions of this Act or the rules made there under shall be in addition to, and not in derogation of the Industrial Finance Corporation Act, 1948, the State Financial Corporation Act, 1951, the Unit Trust of India Act, 1963, the Industrial Reconstruction Bank of India Ltd., 1984, the Sick Industrial Companies (Special Provisions) Act, 1985 and the Small Industries Development Bank of India Act, 1989. The submis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd difficulty of banks and financial institutions to recover loans and enforcement of the same. Mostly, these institutions are public financial institutions and monies are public money. The focus was therefore expeditious adjudication and recovery of debts. The validity of the Act was upheld by the Supreme Court in Union of India v. Delhi High Court Bar Association, (2002) 4 SCC 275 which set aside the judgment of the High Court. Referring to preamble of the RDB Act, he pointed out that the same provides for establishment of tribunals for expeditious adjudication and recovery of debts due to banks and financial institutions . Going by the Objects and Reasons behind the RDB Act, it was crystal clear that the purpose was to unlock the locked potentials of NPAs. In this sense, he submitted, RDB Act was special statute enacted for specific purpose. In this context, explaining the concept of a special law or statute, of Mr.Tripathi endeavored to build step by step edifice of his submissions in the following manner: (a) Section 9 of CPC makes it clear that every party has a right of recourse to civil remedy before a duly constituted civil court unless the remedy is barred either expr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that Arbitration Act may be special statute when it is placed in juxtaposition with the jurisdiction of civil courts to entertain and adjudicate civil disputes inasmuch as in that sense, the Arbitration Act provided for special forum, chosen by the parties who wanted to remain away from the civil court for the adjudication of their inter se disputes. His submission, however, was that there have been instances where the same statute has been treated as a special statute vis- -vis one legislation and as a general statute vis- - vis another legislation. The issue arose in Life Insurance Corporation of India v. D.J. Bahadur, (1981) 1 SCC 315, viz. whether in the context of a dispute between workmen and management (of LIC), the LIC Act or the Industrial Disputes Act is a special statute. It was observed: 52. In determining whether a statute is a special or a general one, the focus must be on the principal subject matter plus the particular perspective. For certain purposes, an Act may be general and for certain other purposes it may be special and we cannot blur distinctions when dealing with finer points of law. The Apex Court further held: ....vis-a-vis 'industrial d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ery of debts. 5. In his attempt to carry home these points, other submissions of Mr.Tripathi were as follows: (i) Section 17 of the RDB Act makes it clear that the DRT alone is to decide the applications of the Banks and Financial Institutions for recovery of debts due to them. Also, Section 18 of the Act clearly bars the jurisdiction of any other court, except High Court and Supreme Court, from entertaining matters specified in Section 17. Furthermore, Section 31 of the Act transfers all such cases pending before any Court to the DRT. It is therefore evident from the scheme of the RDB that an exclusive jurisdiction has been given to the DRT. He argued that the law on this point has already been conclusively settled by the Supreme Court in the matter of Allahabad Bank v. Canara Bank, (2000) 4 SCC 406, where the issue was with regard to jurisdiction of DRT and Recovery Officers under the DRT Act vis- - vis Company Court (when a winding up petition is pending, or a winding up order has been passed). It was held that the adjudication of liability and execution of the certificate in respect of debt payable to banks and financial institutions is within the exclusive jurisdiction o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 91 through to the Arbitration Act, 1940. Apart from Section 34, even Section 18 of the RDB Act ousts jurisdiction of all other courts in relation to matters specified in Section 17. Since arbitration is an alternative to the jurisdiction of civil courts and its jurisdiction would be confined and in alternative to cases where civil courts have jurisdiction, therefore, when the jurisdiction of civil courts are ousted, it would impliedly oust the jurisdiction of the arbitral tribunal also. It is Section 18 which is somewhat in pari materia with Section 5 of the Arbitration Act. (iv) Mr. Tripathi concluded his submissions by referring to the judgment of the Supreme Court in Nahar Industrial Enterprise Ltd. v. Hong Kong and Shanghai Banking Corporation, (2009) 8 SCC 646 and submitted that the issue at hand stands settled by the aforesaid judgment. In that case, the issue was whether the High Court or Supreme Court has the power to transfer a suit pending in a Civil Court to DRT. The Court enunciated the law as under: 117. The Act, although, was enacted for a specific purpose but having regard to the exclusion of jurisdiction expressly provided for in Sections 17 and 18 of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ₹ 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 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y to such safeguards as are necessary in the public interest. iii. Intervention of the courts should be restricted. 10. Thus, the Courts have not been the only forum for conflict resolutions. As already pointed about above, arbitration in the form of statute was given recognition in the year 1899 though even earlier to that, arbitration in some or other form prevailed in this country. What is important is that arbitration as an alternate to resolution by municipal courts is recognized and in the process, sanctity is attached to the domestic forum which is chosen by the parties themselves. In that sense, party autonomy is recognized as paramount. It is a recognition of the fact that the parties are given freedom to agree how their disputes are resolved. Even the intervention by the Courts is restricted and is minimal. 11. What follows from the above? When arbitration as alternate to the civil courts is recognized, which is the common case of the parties before us, creation of Debt Recovery Tribunal under the RDB Act as a forum for deciding claims of banks and financial institutions would make any difference? We are of the firm view that answer has to be in the negative. Wha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in an application under Section 8 of the Act, seeking reference of the parties to a suit to arbitration. While considering an application under Section 11 of the Act, the Chief Justice or his designate would not embark upon an examination of the issue of 'arbitrability' or appropriateness of adjudication by a private forum, once he finds that there was an arbitration agreement between or among the parties, and would leave the issue of arbitrability for the decision of the arbitral Tribunal. If the arbitrator wrongly holds that the dispute is arbitrable, the aggrieved party will have to challenge the award by filing an application under Section 34 of the Act, relying upon Sub-Section 2(b)(i) of that section. 33. But where the issue of 'arbitrability' arises in the context of an application under Section 8 of the Act in a pending suit, all aspects of arbitrability have to be decided by the court seized of the suit, and cannot be left to the decision of the Arbitrator. Even if there is an arbitration agreement between the parties, and even if the dispute is covered by the arbitration agreement, the court where the civil suit is pending, will refuse an application u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reserved for adjudication by a public fora (courts and Tribunals), may by necessary implication stand excluded from the purview of private fora. Consequently, where the cause/dispute is inarbitrable, the court where a suit is pending, will refuse to refer the parties to arbitration, under Section 8 of the Act, even if the parties might have agreed upon arbitration as the forum for settlement of such disputes. 36. The well recognized examples of non-arbitrable disputes are: (i) disputes relating to rights and liabilities which give rise to or arise out of criminal offences; (ii) matrimonial disputes relating to divorce, judicial separation, restitution of conjugal rights, child custody; (iii) guardianship matters; (iv) insolvency and winding up matters; (v) testamentary matters (grant of probate, letters of administration and succession certificate); and (vi) eviction or tenancy matters governed by special statutes where the tenant enjoys statutory protection against eviction and only the specified courts are conferred jurisdiction to grant eviction or decide the disputes. 37. It may be noticed that the cases referred to above relate to actions in rem. A right in rem is a righ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... legislature in its wisdom decided to create a special forum to have expeditious disposal of these cases would not mean that decisions rendered by Debt Recovery Tribunal come in the realm of right in rem‟. At the same time, we find from the judgment in Booz Allen and Hamilton Inc. (supra) that certain kinds of disputes for which tribunals are created are held to be non- arbitrable. Examples are Rent Control Tribunal under the Rent Control Act and Labour Court/Industrial Tribunal under the Industrial Disputes Act, 1947. Obviously, question that would immediately strike is as to what would be the yardstick to determine some kind of disputes to be decided by the tribunals are non-arbitrable whereas some other disputes become arbitrable. According to us, cases where a particular enactment creates special rights and obligations and gives special powers to the tribunals which are not with the civil courts, those disputes would be non-arbitrable. It is a matter of common knowledge that Rent Control Act grants statutory protection to the tenants. Wherever provisions of Rent Control Act are applicable, it overrides the contract entered into between the parties. It is the rights creat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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