The Bombay High Court disposed of the application by appointing a sole arbitrator by exercising power under sub-section (6) of Section 11 of the Arbitration and Conciliation Act, 1996 in the wake of the existing Arbitration Agreement between the parties. A single judge bench of this Court comprising Hon’ble Justice Bharati Dangre held that the Civil Court under Section 8 of the Arbitration and Conciliation Act, 1996 is duty bound to relegate the parties to an Arbitrator, in the wake of the existing arbitration clause.
Brief Facts:
The Applicant, a company incorporated under the provisions of the Companies Act, 1956 and engaged in an activity of conservation of environment at its core so as to ensure eco-friendly plans and solutions, has approached this Court, seeking the appointment of a Sole Arbitrator to adjudicate the disputes that have arisen with the respondent-Canara Bank, a body corporate constituted under the Banking Companies (Acquisition & Transfer of Undertaking) Act.
The aforesaid relief is sought in the wake of an arbitration clause comprised in the common hypothecation Agreement executed between the Applicant and the respondent on 19/12/2017, where it was agreed to refer any dispute arising in connection with the Agreement to an Arbitrator or if there is no agreement reached, then to be referred to a panel of three Arbitrators, one appointed by each party and third selected by two Arbitrators.
Contentions of the Applicant:
The learned Counsel for the Applicant submitted that the remedy available to a bank for recovery of its dues under the Recovery of Debts and Bankruptcy Act, 1993 (“RDB Act”) will not preclude the Applicant, who is a borrower, from initiating proceedings before a Civil Court against the bank or financial institution and amongst the choice between the Civil Court and Arbitration, the latter being a forum chosen by the parties and contemplated in the Agreement in writing, making it imperative for the parties for being referred for Arbitration, the Applicant is entitled to invoke Arbitration.
Contentions of the Respondents:
The learned counsel for the respondent bank vehemently opposed the relief sought in the application by submitting that in the wake of the decision of the Hon’ble Apex Court in the case of Vidya Drolia & Ors. Vs. Durga Trading Corporation (2021) 2 SCC 1, the dispute is non-arbitrable.
Observations of the Court:
The Court observed that the RDB Act contains a provision barring the jurisdiction of any court or authority in relation to the matter to be determined by the Tribunal, the exception being made concerning the recovery of debts due to any multi-State co-operative Bank under the Multi-State Co-Operative Societies Act, 2002.
Further, referring to the various steps as regards various claims under Section 19, it has been held that there is no provision in the RDB Act by which the remedy of a civil suit by the defendant in a claim by the bank is ousted, but it has been held to be a choice of the defendant, who may file a counterclaim or may be desirous of availing of the more strenuous procedure established under the Code. Recording that if the defendant/borrower is to invoke the jurisdiction of the DRT by fling a counterclaim, it was noticed that the bank had a right to seek relegation of that claim to the Civil Courts and DRT has been empowered to do so, even at the final adjudication stage, in the wake of the summary nature of remedy provided before the DRT.
However, given this Court, amongst the Civil Court and the arbitration proceedings, Arbitration being a chosen forum and once it is agreed between the parties that the dispute amongst them, that has or which may arise, shall be referred for Arbitration, the Civil Court under Section 8 of the Arbitration and Conciliation Act, 1996 would not entertain the suit and will relegate the parties to the process of Arbitration.
The decision of the Court:
The Bombay High Court, disposing of the petition, held that the Civil Court is duty-bound to relegate the parties to an Arbitrator in the wake of the existing arbitration clause.
Case Title: Mantras Green Resources Ltd. & Ors. vs Canara Bank
Coram: Hon’ble Justice Bharati Dangre
Case no.: COMM. ARBITRATION APPLICATION (L) NO.12570 OF 2021
Advocate for the Applicant: Mr.Mangesh M.D.Patel
Advocate for the Respondent: Mr.Gajendra A. Rajput
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