Narender Kumar Arora vs Reserve Bank Of India & Ors.
2014 Latest Caselaw 4278 Del

           THE HIGH COURT OF DELHI AT NEW DELHI
%                                Judgment delivered on: 09.09.2014

+       W.P.(C) 5004/2014 & CM No. 9992/2014
NARENDER KUMAR ARORA                                       ..... Petitioner
                                    versus
RESERVE BANK OF INDIA & ORS.                               ..... Respondents
Advocates who appeared in this case:
For the Petitioners  : Mr Prashant Katara.
For the Respondents  : Mr K.S. Parihar for RBI.
                       Mr Kaushik Mishra, Mr Anu Sood and
                       Mr Arun Agarwal for R-2.
CORAM:-
HON'BLE MR JUSTICE VIBHU BAKHRU
                           JUDGMENT

VIBHU BAKHRU, J (ORAL)

CM No. 9992/2014 The exemption is allowed subject to all just exceptions. The application stands disposed of.

W.P.(C) 5004/2014

1. This petition has been filed by the petitioner challenging the assignment of the alleged debt owed by CitiFinancial Consumer Finance India Ltd. (hereinafter referred to as the 'CitiFinancial) to M/s Kotak Mahindra Bank Ltd. (hereinafter referred to as the 'Kotak Bank'). Apparently, the petitioner had availed of financial facilities from CitiFinancial. According to CitiFinancial, the petitioner had defaulted in repayment of the dues as contracted and, therefore, the loan granted to petitioner was classified as a Non-Performing Asset (NPA) in its books.

CitiFinancial has raised disputes with respect to the said debt which have been referred to Arbitration and the sole Arbitrator has entered reference.

2. The application on behalf of Kotak Bank before the Arbitrator has been resisted by the petitioner alleging that the assignment of debt by CitiFinancial to Kotak Bank is in violation of the Reserve Bank of India Guidelines RBI/2005-06/54 dated 13.07.2005. It is also contended that the said guidelines are mandatory.

3. The grievance urged by the petitioner in the present petition - i.e. that the assignment violates the aforementioned guidelines issued by RBI - is identical to the stand taken by the petitioner before the Arbitrator to resist the application filed by Kotak Bank.

4. In particular, the petitioner has relied upon paragraph 5(viii) of the aforementioned guidelines dated 13.07.2005 which reads as under:-

"(viii) A non-performing asset in the books of a bank shall be eligible for sale to other banks only if it has remained a non- performing for at least two years in the books of the selling bank."

5. It is the petitioner's case that the financial assistance granted by CitiFinancial was not a NPA in its books for two years or more on the date when the deed of assignment was entered into between CitiFinancial and Kotak Bank and thus, could not have been assigned to Kotak Bank. It is further contended that since the RBI Guidelines are mandatory, the assignment is liable to be set aside.

6. The respondent has raised a preliminary objection and contended that since the Arbitration Proceedings are pending, the present writ petition ought not to be entertained. It is further contended that the matter would

involve disputed question of facts and proceedings under Article 226 of the Constitution of India would not be the apposite proceedings for adjudicating such disputes.

7. The learned counsel for the petitioner relied upon the decision of the Supreme Court in Karnataka State Industrial and Development Corporation Ltd. v. Cavalet India Ltd. and Ors.: (2005) 4 SCC 456 as well as decision of this Court in DLF Limited v. Punjab National Bank: 180 (2011) DLT 435 and contended that in matters between a corporation and its debtor, a Writ Court would not interfere except in exceptional circumstances which include cases where there is a statutory violation on the part of a corporation. It is urged that since in the present case, the question raised is only limited to violation of the statutory guidelines, this petition would fall within the said exception.

8. I have heard the learned counsel for the parties.

9. I am not pursued that the facts of the present case warrant any interference by this Court at this stage. The question is not whether the Court can entertain a writ petition under Article 226 of the Constitution of India where violation of a statute is alleged but whether this Court should enter upon a dispute which is already a subject matter of proceedings before the Arbitral Tribunal. The learned counsel for the petitioner has handed over the reply filed by the petitioner to the application filed by the Kotak Bank for being substituted in place of CitiFinancial. The said reply clearly indicates that the disputes raised in the present petition have been put in issue before the Arbitrator. The contention that the assignment of debt is

violative of the RBI Guidelines has been specifically pleaded by the petitioner.

10. The Supreme Court in several decisions has held that the width of power under Article 226 of the Constitution of India is wide but the Courts would not interfere where there is an equally efficacious remedy available to the petitioner. The Courts would also refrain from entering upon disputes which are pending before an Arbitral Tribunal.

11. The Supreme Court in the case of Empire Jute Company Limited and Ors. v Jute Corporation of India Limited and Anr.: 2007(14) SCC 680 held as under:-

"The power of judicial review vested in the superior courts undoubtedly has wide amplitude but the same should not be exercised when there exists an arbitration clause. The Division Bench of the High Court took recourse to the arbitration agreement in regard to one part of the dispute but proceeded to determine the other part itself. It could have refused to exercise its jurisdiction leaving the parties to avail their own remedies under the agreement but if it was of the opinion that the dispute between the parties being covered by the arbitration clause should be referred to arbitration, it should not have proceeded to determine a part of the dispute itself."

12. In Tata Finance Limited v. Ajaya Kumar Biswal and Ors.: (2000) 9 SCC 238, the Supreme Court allowed an appeal by setting aside an order passed by a Division Bench of High Court of Orissa which had directed the release of a vehicle that had been seized by Tata Finance. The Supreme Court noted that the matter had been referred to Arbitration and in given

circumstances the order passed by the Division Bench could not be sustained.

13. In the present case, neither the petitioner nor the respondent has contended that the Arbitrator would not have the jurisdiction to decide the question whether the assignment of debt by CitiFinancial to Kotak Bank was illegal and/or invalid.

14. In the given circumstances, where the Arbitration proceedings are pending, it would not be appropriate for this Court to entertain the present petition.

15. Accordingly, the writ petition is dismissed. It is clarified that nothing stated herein should be construed as an expression of opinion on the merits of the disputes.

VIBHU BAKHRU, J SEPTEMBER 09, 2014 RK