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TMI Blog2012 (9) TMI 1143X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 8th 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: "Whether the provisions of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the Arbitration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ach the DRT for recovery of the amount in terms of the RDB Act. In other words, the applicability of the Arbitration Act stands ousted. In our considered view, sub-section(2) of section 34 of the RDB Act only provides that the provision of that Act are in addition to certain acts specified therein. The question which arises for consideration is whether by implication all other Acts not referred to in sub-section (2) of Section 34 are overridden by the provisions of the RDB Act. While considering this aspect, it will have to be borne in mind that firstly, the Arbitration Act was enacted after the enforcement of the RDB Act and secondly, the exclusivity of jurisdiction conferred on the DRTs‟ is perhaps applicable to public forums as against private forums such as an arbitral tribunal. To test the proposition, if one were to ask whether the DRT would refuse to pass an order on a compromise application where parties agree to an intercession of an arbitrator on a portion of a claim during the pendency of the matter before it; the answer may perhaps be in the negative. There are therefore, to our mind, several unanswered aspects of the matter which require closer examination. We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing). Preamble of this Act provides for "establishment of tribunals for expeditious adjudication and recovery of debts due to banks and financial institutions....". Under Section 19, only a bank or a financial institution [as defined under Section 2(d) and (h) of the RDB Act] can trigger the provisions of the RDB Act when the „debt‟ [as defined under Section 2(g)] is more than Rs. 10 Lakhs [Section 1(4)]. Therefore, RDB Act operates within a very narrow compass and deals with a very special situation of recovery of debts due to banks and financial institutions, which clearly makes it a special law dealing with a specific situation. (c) On the other hand, Arbitration Act relates to Entry 11A (Administration of Justice) and Entry 13 (Civil Procedure, including Arbitration) of List III. As per the preamble of this Act, it "consolidates and amends the law relating to domestic arbitration, the international arbitration and enforcement of foreign arbitral awards as to define the law relating to Constitution....". Premised on this, submission of Mr. Tripathi was that the Arbitration Act takes within its sweep all possible arbitrations dealing with an exceptionally wide cross ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Similarly in the case of Damji Valji Shah v. LIC of India, AIR 1966 SC 135, the Supreme Court held: "Further, the provision of the special Act, i.e. the LIC Act, will override the provisions of the general Act, viz., the Companies Act which is an Act relating to companies in general." He also drew our attention to the decision of Snehadeep Structures Pvt. Ltd. v. Maharashtra Small-Scale Industries Development Corporation Ltd., (2010) 3 SCC 34, where the Supreme Court while dealing with applicability of provisions of the interest on delayed payment to Small Scale and Ancillary Industrial Undertaking Act, 1993 vis-à-vis Arbitration Act, held: "38. The preamble of Interest Act shows that the very objective of the Act was "to provide for and regulate the payment of interest on delayed payments to small scale and ancillary industrial undertakings and for matters connected therewith or incidental thereto." Thus, as far as interest on delayed payment to Small Scale Industries as well as connected matters are concerned, the Act is a special legislation with respect to any other legislation, including the Arbitration Act. The contention of the respondent that the matter of inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e meaning of Section 9 to adjudicate civil disputes, subject to the additional limitation where it is a right in rem, which is to be adjudicated. Taking sustenance from the judgment of Supreme Court in the matter of Booz Allen and Hamilton Inc. v. SBI Home Finance Limited & Ors., (2011) 5 SCC 532, he pointed out that the Supreme Court while dealing with the issue of „arbitrability‟ of dispute held that Arbitral Tribunals are „private fori‟ chosen by the parties in place of Courts or Tribunals which are „public fori‟ constituted under the laws of the country. All disputes relating to „right in personam‟ are considered to be amenable to arbitration and all disputes relating to „right in rem‟ are required to be adjudicated by courts and public tribunals, being unsuited for private arbitration. He attempted to apply the ratio of the aforesaid judgment to the given case arguing that when the legislature has expressly made a particular kind of dispute to be decided by a public forum, then the same has been by implication excluded from the purview of arbitrability and therefore cannot be decided by a private forum like arbitratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... civil suits before the civil courts. It is only for the claims of the banks and the financial institutions above the aforementioned sum that they have to approach the Debt Recovery Tribunal. It is also without any cavil that the banks and the financial institutions, keeping in view the provisions of Sections 17 and 18 of the Act, are necessarily required to file their claim petitions before the Tribunal. The converse is not true. Debtors can file their claims of set off or counter-claims only when a claim application is filed and not otherwise. Even in a given situation the banks and/or the financial institutions can ask the Tribunal to pass an appropriate order for getting the claims of set-off or the counter claims, determined by a civil court. The Tribunal is not a high powered tribunal. It is a one man Tribunal. Unlike some Special Acts, as for example Andhra Pradesh Land Grabbing (Prohibition) Act, 1982 it does not contain a deeming provision that the Tribunal would be deemed to be a civil court." 5. Mr. Puneet Bhalla, learned counsel appearing for the bank adopted the aforesaid arguments. In addition, he heavily relied upon the reasons given by the Division Bench in Kohinoo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntry as per the Constitution and the laws. However, it is also recognized that that is not the only means for determination of lis or resolution of conflicts between the parties. Still the parties are given freedom to choose a forum, alternate to and in place of the regular courts or judicial system for the decision of their inter se disputes. There has been a recognition of the concept that notwithstanding the judicial system, parties are free to chose their own forum in the form of arbitration. This was first recognized by enacting Arbitration Act, 1891. Introduction of Section 89 in the Code of Civil Procedure by amendment to the said Code in the year 2002 takes this concept further by introducing various other forums, known as Alternate Dispute Resolution. Thus, even when the matter is pending in the Court, parties to the dispute are given freedom to resort to Lok Adalat, conciliation, mediation and also the arbitration. 9. All civil societies demand a proper, effective and independent judicial system to resolve the disputes that may arise. Resolution of disputes by Municipal Courts is, therefore, prevalent in all countries and independence of judiciary is endeavoured in democ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at there are so many such tribunals created. Service matters of the civil servants and employees of public bodies/authorities which were hitherto dealt with by the civil courts and the High Court are now given to the Central Administrative Tribunal and State Administrative Tribunals with the enactment of Administrative Tribunals Act, 1985. Disputes of defence personnel are now dealt with by special tribunals called Armed Forces Tribunal constituted under the Armed Forces Tribunal Act, 2007. With the creation of all these special tribunals, the matters which were up to now dealt with by civil courts or High Courts are to be taken up by these tribunals in the first instance. (We would like to point out that in so far as High Court is concerned, constitutional remedy provided under Article 226 of the Constitution of India remains intact as held in L. Chandrakumar v. Union of India, (1994) 5 SCC 539. However, it is not necessary to dilate on this issue as that does not have any bearing on the present issue). 12. With the creation of these alternate fora with all trappings of the Court and with the decision of the disputes which were hitherto dealt with by the civil courts, can it be s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bitrability' has different meanings in different contexts. The three facets of arbitrability, relating to the jurisdiction of the arbitral tribunal, are as under: (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the subject matter of the case, whereas actions in rem refer to actions determining the title to property and the rights of the parties, not merely among themselves but also against all persons at any time claiming an interest in that property. Correspondingly, judgment in personam refers to a judgment against a person as distinguished from a judgment against a thing, right or status and judgment in rem refers to a judgment that determines the status or condition of property which operates directly on the property itself. (Vide: Black's Law Dictionary). 38. Generally and traditionally all disputes relating to rights in personam are considered to be amenable to arbitration; and all disputes relating to rights in rem are required to be adjudicated by courts and public tribunals, being unsuited for private arbitration. This is not however a rigid or inflexible rule. Disputes relating to sub-ordinate rights in personam arising from rights in rem have always been considered to be arbitrable." 13. What is discernible from the above is that all disputes relating to „right in personam‟ are arbitrable and choice is given to the parties to choose this alternate forum. On ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tes Act, 1947 creates special rights in favour of the workman or employers and gives special powers to the industrial adjudicators/tribunals to even create rights which powers are not available to civil courts. Obviously such disputes cannot be decided by means of arbitral tribunals which are substitute of civil courts. On the other hand, in so far as tribunal like Debt Recovery Tribunal is concerned, it is simply a replacement of civil court. There are no special rights created in favour of the banks or financial institutions. There are no special powers given to the Debt Recovery Tribunal except that the procedure for deciding the disputes is little different from that of CPC applicable to civil courts. Otherwise, the Debt Recovery Tribunal is supposed to apply the same law as applied by the civil courts in deciding the dispute coming before it and is enforcing contractual rights of the Banks. It is, therefore, only a shift of forum from civil court to the tribunal for speedy disposal. Therefore, applying the principle contained in Booz Allen and Hamilton Inc. (supra), we are of the view that the matters which come within the scope and jurisdiction of Debt Recovery Tribunal are a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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