Court : Debt Recovery Appellate Tribunal - Mumbai
Brief : However, as I have held that
the provisions of the SRFAESI Act have overriding effect and the
provisions of the Arbitration and Conciliation Act, 1996 are not
applicable to the SRFAESI Act, question of referring dispute to the
Arbitrator and his decision on the jurisdiction of the Arbitral
Tribunal under Section 16(1) of the Arbitration and Conciliation Act
docs not arise. Second assumption, on which Advocate's argument
proceeded is on the basis of earlier view taken by the Suprcme Court in
the Konkan Railway Corporation case , that once there
is an agreement for arbitration between the potties, the Civil Court,
Chief Justice of the High Court or of the Supreme Court has to perform
only administrative function by referring the matter to the Arbitral
Tribunal without considering whether arbitration clause is applicable
lo the facts of the case or not.
Citation :
State Bank Of India vs Heera Laxmi Contractor Pvt. Ltd. And Ors. on 17/4/2006
JUDGMENT
S.S. Parkar, J. (Chairperson)
1. The main legal question that arises for consideration in this appeal
is whether mandatory provisions of the Arbitration Act would be
applicable in a proceeding initiated under the provisions of the
Securitization and Reconstruction of Financial Assets and Enforcement
of Security Interest Act, 2002 (hereinafter referred to as "The SRFAESI
Act").
2. This appeal has been filed against the order dated 2nd February,
2006 passed by the In-charge Presiding Officer of D.R.T., Nagpur
rejecting the application made on behalf of the appellant Bank to refer
the dispute between the parties for arbitration by virtue of Section 8
of the Arbitration and Conciliation Act, 1996 in the following
circumstances.
3. The appellant Bank had put property mortgaged to it by one of its
borrowers for auction. The respondent No. 1 was a successful bidder,
who had offered to buy the said property for Rs. 10.40 crores. As the
respondent No. 1 failed to pay the balance amount within stipulated
period, the deposit paid by him was forfeited and the Bank sold the
property for a sum of Rs. 12 crores to the respondent No. 2 privately.
The respondent No. 1 challenged the action of the appellant Bank by
filing writ petition being Writ Petition No. 40/2006 in the High Court
of Bombay at Nagpur, seeking direction against the Bank to complete the
sale of the mortgaged property in favour of the respondent No. 1.
4. In the said writ petition, written submissions were filed on behalf
of the appellant Bank and preliminary objection was raised about
maintainability of the petition submitting that since the appeal has
been provided under the SRFAESI Act against the action of the
authorised officer, an appeal would lie to the D.R.T., Reliance was
placed on the judgment of the Supreme Court in the case of Mardia
Chemicals Ltd. v. Union of India II . Upholding the
objection the High Court by its order dated 12th January, 2006, allowed
the respondent No, 1. to withdraw the petition und prefer tin appeal
before the D.R.T. under the provisions of the SRFAESI Act. Accordingly,
the respondent No. 1 filed appeal before the D.R.T., Nagpur. In the
said appeal, in view of the arbitration clause, the appellant Bank
filed an application for referring the mailer to arbitration by virtue
of Section 8 of the Arbitration Act. That application was resisted on
behalf of the respondent No. 1. The D.R.T. by the impugned order took a
view that there was no clear, unequivocal and written agreement for
arbitration between the parties and, therefore, the application made on
behalf of the appellant Bank under Section 8 of the Arbitration Act was
rejected. Hence, the present appeal is filed by the Bank.
5. The learned Advocate appearing for the appellant Bank took me
through the relevant correspondence between the parties. To begin with,
the reliance was placed, at the first instance, on the letter dated
11th November, 2005 addressed to the respondent No. 1 by the appellant
Bank communicating Bank's acceptance of the offer made by the
respondent No. 1 by their letter dated 10th September. 2005 to purchase
the mortgaged property for a sum of Rs. 10.40 crores which was put for
auction by the Bank under the provisions of the SRFAESI Act. The said
letter states that conditions of auction dated 29th November, 2004 and
12lh February, 2005 shall be binding on the respondent No. 1. It seems
that conditions of the auction were spelt out on behalf of the
appellant Bank in the announcements made by the Bank at its zonal
office at Nagpur on 29th November, 2004 and 12th February, 2005. Clause
19 of the announcement made on 29th November, 2004, in writing, states
that at the relevant date if any dispute is raised by either of the
bidders for any reason whatsoever, the same shall be referred to
Arbitrator. Identical provision was made in the announcement dated 12th
February, 2005 in Clause 14 thereof.
6. It is argued on behalf of the appellant Bank, that, from the letter
of acceptance dated 11th November, 2005 referred to above, it is clear
that the offer to purchase property by the respondent No. 1 was
accepted subject to the conditions of the auction as per announcements
dated 29th November, 2004 and 12th February, 2005 and, therefore, the
respondent No. 1 did not raise any objection thereto. The offer was
accepted by the Bank subject to the conditions, which provided for
referring the dispute between the parties to the arbitration. In this
connection, a copy of the letter dated 8th December, 2005 addressed to
the appellant Bank by and on behalf of the respondent No. 1 is brought
to my notice referring to the terms and conditions of the auction
embodied in the announcements dated 29th November, 2004 and 12th
February, 2005 though in different connection or context. It is,
therefore, rightly argued that the respondent No. 1 was aware of the
conditions and they, having no objection to any of the conditions, they
had entered into the transaction in question subject to those
conditions, which included condition of referring the dispute between
the parties to arbitration.
7. However, on behalf of the respondents, it is argued that in order to
make condition of arbitration binding on the parties, the said
condition must be expressly agreed to and signed by and between the
parties. In this respect, reliance is placed on some decisions of the
High Courts, firstly on the judgment of the Bombay High Court in the
case of Pramod Chimanbai Patel v. Lalit Constructions 2003 (4) R.A.J.
171 (Bom.). That was a case where arbitration clause was introduced
between the parties after a period of about two years of coming into
existence of the contract. The High Court doubted the authenticity of
the document containing arbitration clause. The respondent had also
filed several affidavits of several persons in support of the case that
the respondent had handed over blank signed letterheads lo the
petitioner. In that context, the Court held, referring to Clause (b) of
Sub-section 4 of Section 7 of the Arbitration Act, which states that an
exchange of letters, telex, telegrams or other means of
telecommunication which provide a record of the agreement or a
statement of claim and defence clearly contemplate that such a document
would be an arbitration agreement, in writing only when it is exchanged
between the parties and, therefore, petition seeking direction for
reference to arbitration was dismissed.
8. Then reliance was placed on the judgment of the Delhi High Court in
the case of C.H. Nivedita Reddy v. Escort Finance Limited II
. In that case, view taken by the Delhi High Court is
that unless and until the parties to the contract are signatories to
the arbitration agreement or exchange of letters, telex, telegrams or
other means of telecommunication providing a record of the agreement,
or one party alleges agreement and other party docs not deny the same,
no dispute can be arbitrated upon. Relying on the aforesaid view taken
as regards Section 7 of the Arbitration and Conciliation Act, the
D.R.T. was of the opinion that in the absence of any evidence to
conclude that the parties were ad adem on the point, the proceedings
could not be referred to arbitration. As regards letter dated 8th
December, 2005, the D.R.T. has observed that the reference is made only
to the date and not to the condition of arbitration mentioned therein
and. therefore, there was nothing on record to show that the appellants
subscribed to the term of arbitration in those announcements.
9. However, it is well settled principle of Law of Contract that if
acceptance is made subject to a condition and the offer has accepted
the acceptance and acted upon it the agreement is subject to such
condition put by the acceptor. Letter of the Bank dated 11th November,
2005 accepting the offer has expressly stated that all the terms and
conditions of the auction dated 29th November, 2004 and 12th February,
2005 (both of which expressly contained clauses about arbitration)
shall be binding on the respondent No. 1 and therefore, the offer
cannot be said to have been accepted without those conditions,
especially when respondent No. 1 had not raised any objection. Clause
(b) of Sub-section (4) of Section 7 of the Arbitration and Conciliation
Act makes it clear that the arbitration agreement need not be in
writing but can be spelt out from the exchange of letters and other
communications between the parties. It is important to refer to
Sub-section (5) of Section 7 of the said Act which, states that the
reference in a contract to a document containing an arbitration clause
constitutes an arbitration agreement if the contract is in writing and
the reference is such as to make that arbitration clause part of the
contract.
10. In my view, by virtue of Section 7(4)(b) and Section 7(5), the
letter of acceptance dated 11th November, 2005, addressed to respondent
No. 1 by the appellant Bank, which expressly refers to terms and
conditions of the auction announcements dated 29th November, 2004 and
12th February, 2005 creates binding agreement between the parties,
which provides for arbitration. In my opinion, it is difficult for the
respondent No. 1 to escape from the said arbitration clauses in the
teeth of their letter dated 8th December, 2005, addressed to the
appellant Bank, which expressly refers to the terms and conditions of
auction dated 29th November, 2004 and 12th February, 2005 and
demonstrates that the respondents were aware of and had accepted all
the conditions contained in those announcements including clauses
regarding arbitration. The respondent No. 1 do not have to refer in the
letter of 8th December, 2005 to the condition of the arbitration
mentioned in the announcements of 29th November, 2004 and 12th
February, 2005 to make arbitration clause binding on them as opined by
the D.R.T. in the impugned order. The D.R.T. is clearly wrong in
observing that the reference is made only to the date of the
announcements and, therefore, arbitration clauses were not binding on
the respondent No. 1. The reference is in fact made to the terms and
conditions of the auction.
11. View of the Bombay High Court in the case of Pramod Chimanbai Patel
(supra), on which reliance has been heavily placed by the D.R.T., was
taken in the context of the peculiar facts and circumstances of the
case to which I have made reference earlier. The High Court had in para
2 of the said judgment doubted authenticity of the document containing
arbitration clause which was introduced after a period of about two
years after coming into existence of the contract. Similarly, the view
taken by Delhi High Court in the case of Nivedita Reddy (supra) was in
the context of the facts of that case, where there was an unilateral
agreement which was held to be impermissible between the parties and I
am, therefore, of opinion that the D.R.T. had erred in holding that
there was no agreement providing arbitration clause between the
parties.
12. On behalf of the respondents, however, it is argued firstly that
even if it is held that there is an agreement between the parties, the
application to refer the matter for arbitration ought to have been made
at the earliest opportunity. Secondly, it is argued that the provisions
of the Arbitration and Conciliation Act would not be applicable to the
proceedings initiated under the provisions of the SRFAESI Act.
13. As regards the first point, it is submitted on behalf of the
respondents that when the respondents filed writ petition in the High
Court the appellants did not raise the question about the arbitration
agreement between the parties and did not seek direction to refer the
dispute to the Arbitrator but, raised a preliminary objection as to the
maintainability of the petition in the High Court on the ground of
availability of alternate remedy under the provisions of SRFAESI Act,
which according to the appellant Bank, is a complete code in itself
wherein an authorised officer of the Bank acts as quasi judicial
authority as held by the Apex Court in the Mardia Chemicals' case. It
is further submitted that if any person is aggrieved by any act or acts
of the authorized officer under the SRFAESI Act his remedy is to
approach the D.R.T. under Section 17 of the SRFAESI Act which provides
for right to appeal.
14. In the preliminary objections raised as to the maintainability of
the petition and other elaborate submissions dated 12th January, 2006
filed on behalf of the appellant Bank, I find no whisper about the
arbitration agreement between the parties nor request to refer the
matter for arbitration. However, on behalf of the appellant Bank, it is
argued that in the writ petition generally constitutional validity is
challenged and, therefore, that cannot be said to be the earliest,
opportunity available to the appellant Bank to raise the question of
referring the matter for arbitration. According to the learned Counsel,
the party must get an opportunity to submit his first statement on the
substance of the dispute when the matter is filed before a proper Forum
like Civil Court.
15. The writ petition was filed as it appears from the order of the
High Court dated 12th January, 2006, seeking cancellation of the sale
dated 6th January, 2006 in respect of the mortgaged property to
respondent No. 2 on the ground that there had already been a concluded
contract between the Bank and respondent No. 1. It is common knowledge
that a writ petition is filed to challenge constitutional validity of
an Act as being ultra vires and/or to strike down an Act which is
either discriminatory or arbitrary in nature. The dispute was
definitely with regard to the question whether there was a concluded
contract between the appellant Bank and the respondents regarding sale
of the property. In my view, the appellant Bank should not have waited
till the appeal was filed before the D.R.T. under the provisions of the
SRFAESI Act to raise the question of reference to arbitration. The
appellant Bank could have raised the point of referring (he dispute to
the arbitration under the provisions of the Arbitration Act in the writ
petition itself, as required under Section 8(1) of the Arbitration and
Conciliation Act, 1996.
16. The other submission made on behalf of the respondents, is that
even assuming that there was an arbitration agreement between the
parties, the provisions of Arbitration and Conciliation Act, 1996 would
not be applicable to a matter arising under the SRFAESI Act. In this
connection, the appellants' Advocate has brought to my notice
observations of the D.R.T. taking the view that if there is an
arbitration agreement between the parties, in view of Section 16 of the
Arbitration and Conciliation Act, 1996 there is an Arbitral Tribunal
which only can rule on its own jurisdiction. In other words, according
to the D.R.T., if there is existence of an arbitration agreement
between the parties, the dispute will be decided by the arbitrator
only. Before I discuss the said point another submission made on behalf
of the appellants will have to be considered. It is argued that the
above question having been decided by the D.R.T. the respondents have
no locus to raise the said point in the absence of cither any
cross-appeal or cross-objections filed by the respondents before this
Tribunal.
17. As regards the question whether it would be open for the
respondents to argue the point which was held against them without
filing appeal or cross objections, reference may be made to the
provisions of Order41 Rule 22 of the Code of Civil Procedure which
expressly permit the respondent though he may not have filed any appeal
from any part of the decree, or cross-objections, not only to support
the decree but also to state that the finding given against him in the
Court below in respect of any issue ought to have been in his favour.
The said provision has been interpreted by the Supreme Court in the
case of Ravinder Kumar Sharma v. State of Assam . That
was a case where the plaintiff had filed appeal against partial decree
granted to him and it was held that in such a case even without filing
any appeal or cross-objections the defendants/respondents can for
purpose of sustaining the impugned part of the decree, attack the
findings on which the part of decree passed against him was based. The
said provision of CPC, before and after the amendment, has been lucidly
interpreted in the later decision of the Supreme Court in the case of
Banarasi v. Ram Phal 2003 (1) UJ. 615 (SC). The present case falls
under Clauses 2 and 3 mentioned in para 9 of the said judgment and,
therefore, the respondent is entitled to assail the finding on the
issue which has been decided against him as also the finding in the
judgment which goes against the respondent, without filing
cross-objections. In view of the aforesaid position in law, I see no
reason to disallow the respondents from assailing the view taken by the
D.R.T. against the respondent No. 1.
18. On behalf of the respondents, it is contended that the SRFAESI Act
is a special enactment, which has got overriding effect and, therefore,
mandatory provisions of Section 8 of the Arbitration and Conciliation
Act would not be applicable. Reliance is placed on the provisions of
Sections 34, 35 and 37 of the SRFAESI Act. Section 34 of the Act bars
jurisdiction of the Civil Court to entertain any suit or proceeding in
respect of any matter which the D.R.T. or the D.R. A.T. is empowered
under the provisions of the SRFAESI Act to determine. Section 35 of the
Act is most relevant in this connection, which states as follows:
35. The provisions of this Act to override other laws. - The
provisions of this Act shall have effect, notwithstanding anything
inconsistent therewith contained in any other law for the time being
in force or any instrument having effect by virtue of any such law.
Section 37 of the SRFAESI Act states that the provisions of the said
Act and Rules made thereunder shall be in addition to and not in
derogation of the certain Acts named therein or any other law for the
time being in force.
19. Provisions of Section 35 provide for overriding effect of the
SRFAESI Act over other laws. It is well settled that when two statutes
contain non-obstante clauses the later statute would prevail. The
rationale behind this is that the Legislature at the time of enactment
of the later statute, is aware of the earlier legislation containing a
non-obstante clause. Secondly, if there is a special statute though
enacted earlier in point of time with a non-obstante clause, prevails
over the later enactment, if the latter is a general statute as held by
the Supreme Court in the case of Maharashtra Tubes Ltd. v. State
Industrial and Investment Corporation of Maharashtra .
In this connection, the Advocate for the respondents placed heavy
reliance on the judgment of the Supreme Court in the case of Fair Air
Engineers Pvt. Ltd. v. N.K. Modi III . That was a case
where the Supreme Court was concerned with regard to the applicability
of provisions of the Arbitration and Conciliation Act to a matter which
was covered by the Consumer Protection Act, 1986. No doubt, in that
case the Supreme Court was concerned with the provisions of the
Arbitration Act, 1940 and not mandatory provisions of Section 8 of the
Arbitration and Conciliation Act, 1996. The provisions of Arbitration
Act, 1940 gave option to go for arbitration under Section 34 of the
Arbitration Act of 1940. Considering the provisions of Section 3 of the
Consumer Protection Act, which lay down that the provisions of that Act
are in addition to and not in derogation of the provisions of any other
law for the time being in force, the Supreme Court held that it was not
necessary to refer the dispute to arbitration and the matter could be
decided on merits under the provisions of Consumer Protections Act. The
Advocate for the respondents, therefore, relying on the provisions of
Section 37 of the SRFAESI Act, which provide that the provisions of the
said Act are in addition to and not in derogation of the Acts named
therein or any other law for the time being in force, rightly argued
that the D.R.T. has power to adjudicate upon the dispute which was
raised before it under Section 17 of the SRFAESI Act without referring
the matter for arbitration.
20. Reliance was also placed on behalf of the respondents on the
judgment of the Supreme Court in the case of Secretary, Thirumurugan
Co-operative Agricultural Credit Society v. M. Lalitha (dead) through
LRs. I , where the question was whether the dispute
should have been decided under the Consumer Protection Act or it should
have been referred to the arbitrator under Section 90 or 156 of T.N.
Cooperative Societies Act, 1983, which provide for reference to the
Arbitrator. It was held in that case that the jurisdiction of the
Consumer Forum to decide the dispute was not ousted in view of the
remedy of arbitration provided under Section 90 of the T.N.
Co-operative Societies Act, which had exclusive jurisdiction to decide
dispute between member and co-operative Society. It was observed in
para No. 11 of the judgment that:
From the statement of objects and reasons and the scheme of 1986
Act, (Consumer Protection Act) it is apparent that the main
objective of the Act is to provide for better protection of the
interest of the consumer and for that purpose to provide for better
redressal mechanism to which cheaper, easier, expeditious and
effective redressal is made available to the consumers.
Reference was also made in that case to the judgment of the Supreme
Court in the case of Fair Air Engineers (supra) and other judgments of
the Apex Court on the point.
21. Next, reliance was placed heavily on the judgment of the Delhi High
Court in the case of Kohinoor Creations v. Syndicate Bank
, which had considered mandatory provisions of the
Arbitration and Conciliation Act, 1996 vis-a-vis RDDBFI Act, 1993.
After considering the various judgments of the Supreme Court and the
provisions of the RDDBFI Act, 1993, which was earlier in point of time
than the present Arbitration and Conciliation Act. 1996 and
non-obstante clause in Section 34 of the RDDBFI Act, 1993, which is on
the lines of Section 35 of the SRFAESI Act, it was held that Section 34
of the RDDBFI Act had overriding effect and the provisions of the
Arbitration and Conciliation Act, 1996 would cease to have any
application to the proceedings before the D.R.T. In my opinion, as per
the said ratio, by virtue of the provisions of Section 35 of the
SRFAESI Act, the latter Act will have overriding effect over Section 8
of the Arbitration and Conciliation Act, 1996. which was enacted
earlier in point of time. The provisions of SRFAESI Act having been
enacted later in point of time, surely the Legislature can be deemed to
have been aware of the earlier enactment of Arbitration and
Conciliation Act, 1996 and if the Legislature had intended that
mandatory provisions of Section 8 of the Arbitration and Conciliation
Act, 1996 were to prevail over the provisions of the SRFAESI Act, it
would have been so provided in the SRFAESI Act.
22. Slight distinction is sought to be carved out between the
provisions of SRFAESI Act, 2002 and the provisions of RDDBFI Act, 1993,
with which the Delhi High Court in the case of Kohinoor Creations
(supra), was concerned, by pointing out that while Sub-section (2) of
Section 34 of RDDBFI Act, 1993 states that provisions of RDDBFI Act
shall be in addition to and not in derogation of the certain Acts named
therein, which does not refer to the Arbitration and Conciliation Act,
1996, Section 37 of the SRFAESI Act may be construed to include even
the Arbitration and Conciliation Act. 1996, whose application was not
barred because of the last portion of the section viz. or any other law
for the time being in force. In my opinion, that would not make any
difference in view of the ratio of the Supreme Court decisions in the
case of Fair Air Engineers (supra) and in the case, of Secretary,
Thirunuirugan Cooperative Agricultural Credit Society (supra).
Secondly, if we consider that the SRFAESI Act is a special enactment,
enacted for the purpose of speedy disposal of the cases for the
recovery of debts due to the Banks and the fact that the proceedings
before the Arbitrator are considered to be cumbersome by the Apex Court
in the case of Fair Air Engineers Pvt. Ltd. (supra) the provisions of
the Arbitration and Conciliation Act cannot be said to be applicable to
the matters covered by the SRFAESI Act, It cannot be forgotten that the
provisions of the SRFAESI Act are a step ahead of the provisions of the
Arbitration and Conciliation Act. 1996 and the RDDBFI Act, 1993
inasmuch as the Banks have been empowered to act or proceed even faster
and more speedily than under the provisions of RDDBFI Act, 1993 in
respect of recovery of their dues by enforcement of the security. The
Arbitration and Conciliation Act, 1996 is mainly intended to apply to
the civil cases filed in the Civil Courts, where it takes years for the
recovery of the claims of the private parties. One is at a loss to know
why the appellant Bank, instead of opting for speedier remedy available
under the SRFAESI Act, has chosen to go for arbitration in this case.
23. On behalf of the respondent No. 1, it is also argued that the
remedy under Section 17 of the SRFAESI Act is that of an appeal against
the action taken under Section 13 of the SRFAESI Act by the authorised
officer of the Bank, who, according to the appellant Bank, as per the
submission made before the High Court in the writ petition, has been
stated to be a quasi judicial authority. The question is, therefore,
whether Arbitrator can be said to have power and jurisdiction to hear
appeal against the order or action taken under Section 13 of the
SRFAESI Act. In this respect, reliance is placed on the judgment of the
Supreme Court in the case of Haryana Telecom Ltd. v. Sterlite
Industries (India) Ltd. III , wherein it was held that
the petition, filed for winding-up of the company on the ground that
company had become insolvent and therefore, should be wound up, cannot
be referred to the arbitration under Section 8(1) of the Arbitration
and Conciliation Act, 1996. Because in a petition for winding-up the
claim is not for money and the power to order winding-up is conferred
by the Companies Act on the Court and therefore, the Arbitrator had no
jurisdiction to order winding-up of the company. Similarly in the
present case, the dispute is not about money claim but whether the Bank
could have rescinded the agreement to sell the property to the
respondent No. 1 and entered into a fresh contract with the respondent
No. 2, which question can be a subject matter of appeal under Section
17 of the SRFAESI Act. Therefore, in my view, the said question could
have been decided by the D.R.T. only, which is empowered and entitled
to decide the appeal under Section 17 of the SRFAESI Act against the
order of authorised officer passed under Section 13 of the SRFAESI Act.
24. On behalf of the appellant Bank, it is also argued strenuously that
once it is held that there was an arbitration agreement between the
parties, there is no option for any Forum than to refer the matter to
the arbitration under the mandatory provision of Section 8 of the
Arbitration and Conciliation Act, 1996. According to the Counsel, by
virtue of Section 16(1) of the Arbitration and Conciliation Act, the
Arbitrator only can rule on his own jurisdiction. In this connection,
he placed reliance on the judgment of the Supreme Court in the case of
Hindustan Petroleum Corporation Ltd. v. Pinkcity Midway Petroleums
, and also on the decision of the Supreme Court in the
case of Kalpana Kothari v. Sudha Yaduv IV . Those
cases were filed in the Civil Court and since there was clause, for
arbitration in the agreement between the parties, there was no
alternative but to refer the dispute to arbitration by virtue of
mandatory provisions of Section 8 of the Arbitration and Conciliation
Act, 1996. It was therefore, held that if there was any objection as to
the applicability of the arbitration clause to the facts of the case,
the same would have to be raised before the concerned Arbitral
Tribunal. Emphasis was laid by the Counsel for the appellants on the
view taken by the Supreme Court in the first case, that by virtue of
Section 16(1) of the Arbitration and Conciliation Act, 1996, if there
was any objection to the applicability of the arbitration clause, the
same would be raised before the Arbitral Tribunal only who would decide
the same. This argument proceeds on two assumptions, firstly that
mandatory provisions of the Arbitration and Conciliation Act had
overriding effect over the SRFAESI Act. However, as I have held that
the provisions of the SRFAESI Act have overriding effect and the
provisions of the Arbitration and Conciliation Act, 1996 are not
applicable to the SRFAESI Act, question of referring dispute to the
Arbitrator and his decision on the jurisdiction of the Arbitral
Tribunal under Section 16(1) of the Arbitration and Conciliation Act
docs not arise. Second assumption, on which Advocate's argument
proceeded is on the basis of earlier view taken by the Suprcme Court in
the Konkan Railway Corporation case , that once there
is an agreement for arbitration between the potties, the Civil Court,
Chief Justice of the High Court or of the Supreme Court has to perform
only administrative function by referring the matter to the Arbitral
Tribunal without considering whether arbitration clause is applicable
lo the facts of the case or not.
25. However, that view having been overruled by the recent majority
decision of the Bench of Seven Judges of the Supreme Court in the case
of S.B.P. and Co. v. Patel Engineering Ltd. IV (2005) CLT 236 (SC) :
(2005) 8 SCC 618, holding that power conferred under Section 11(6) and
exercised by the Chief Justice of a High Court and the Chief Justice of
the Supreme Court is a judicial power and not an administrative power,
the argument cannot hold water. Thus, by virtue of this latest judgment
of the Supreme Court by Larger Bench of Seven Judges, the question
whether the matter needs to be referred to arbitration has to be
decided by the Forum before whom the question has been raised and the
Supreme Court has held that Section 16 cannot be held to empower the
Arbitral Tribunal to ignore the decision given by the Judicial
Authority or the Chief Justice before the reference to it was made (see
para 20 of the judgment).
26. Thus, view taken by the Supreme Court in the Hindustan Petroleum's
case (supra), that if there is any objection as to the applicability of
the arbitration clause to the facts of the case, the same will have to
be raised before the Arbitral Forum and the Civil Courts are not
empowered to enquire about applicability of the arbitration clause to
the facts of the case, cannot be said to be a good law in view of the
latest majority decision of the Seven Judges' Bench of the Supreme
Court in the case of S.B.P. and Co. (supra).
27. In the case of Kalpana Kothari v. Sudha Yadav (supra), the Supreme
Court was trying to distinguish between provisions of Section 34 of the
Arbitration Act, 1940 and provisions of Section 8 of Arbitration and
Conciliation Act, 1996. That case has no application to the point
raised in the present appeal, which is about the overriding effect of
SRFAESI Act in the light of various judgments of the Supreme Court and
the interpretation and the applicability of the provisions of
Arbitration and Conciliation Act, 1996.
28. For the view taken by me on the law points raised in this matter,
the appeal is dismissed. The order of status quo with regard to the
property passed earlier, shall continue till next date before the
D.R.T., Nagpur.
Before parting with this appeal, I must record my appreciation of the
able assistance rendered by the learned Counsel of both sides.
