No Revise Petition To Be Filed If Award Is Already Given Under Section 11 Of A&C Act: Supreme Court

CASE TITLE:
M/s. Diamond Entertainment Technologies Limited v. Religare Finvest Limited Through Its Authorized Officer.

DATE OF ORDER:
10 Jan 2023.

JUDGE(S):
Hon’ble Mr. JusticeNeena Bansal Krishna.

PARTIES:
Petitioner: M/s. Diamond Entertainment Technologies Limited.
Respondent: Religare Finvest Limited Through Its Authorized Officer.

SUBJECT

In the present case, the Court is dealing with a matter where the appellant filed a petition under the wrong jurisdiction. The Court herein explains that a review petition cannot be filed if an award is already given under Section 11 of the Arbitration and Conciliation Act, 1996.

IMPORTANT PROVISIONS

The Arbitration and Conciliation Act, 1996

• Section 11- Appointment of Arbitrators.

BRIEF FACTS

• In the present case,the respondent had mislead the Court by placing reliance on the Full Bench Judgement of Delhi High Court in HDFC Bank Ltd. Vs. Satpal Singh Bakshi (2012 SCC OnLine Del 4815). Supreme Court has overruled this case with Vidya Drolia and Ors. Vs. Durga Trading Corporation [(2021) 2 SCC 1].
• The law laid down in HDFC Bank Ltd. Vs. Satpal Singh Bakshi (2012 SCC OnLine Del 4815) is no longer a good law.
• In Vidya Drolia and Ors. Vs. Durga Trading Corporation [(2021) 2 SCC 1] it has been laid down that there was a prohibition against the waiver of jurisdiction of Debt Recovery Tribunal (DRT) by necessary implication under Section 34 and 35 of the SARFAESI Act and any claim against the measures taken by the Financial Institutions under the said Act are not arbitrable.
• A Demand Notice was issued on 12 July 2021 under Section 13(2) of The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as “SARFAESI Act, 2002”). The petitioner issued the Posession Notice on 6 December 2021.
• The respondent thereafter filed an application under Section 14 of the SARFAESI Act, 2002 before the learned CMM, Saket and obtained orders thereunder.
• Basically, the respondent approached this Court because of the measures which were taken by him under the relevant provisions of the SARFAESI Act, 2002. The invocation of arbitration in regard to the matters covered under the SARFAESI Act, 2002 was held illegal. It was also held that under no circumstances this would fall within the ambit of the Arbitration and Conciliation Act, 1996.
• The respondent herein has assailed the Order passed in the original application which was filed by the Bank under Section 19 of the Recover of Debts and Bankruptcy Act, 1993 (hereinafter to be referred to as “RDB Act”).
• The loan availed by the petitioner was restructured vide Facility Agreement on 27 January 2021. The reference of the disputes that arose under this loan agreement due to failure of the petitioner to abide by the restructured payment plan was referred to arbitration on 8 January 2015. On 9 June 2015, the final award was given.
• There was no fresh cause of action that had accrued between the parties in respect of which Section 11 could have been filed. There were no individual disputes and the previous ones have been adjudicated in the previous award.
• The respondent herein says that the cause of action arose because of filing the present petition which arose on the issuance of Demand Notice on 12 July 2021 under Section 13(2) of the SARFAESI Act, 2002. This Demand Notice was issued because of default in the re-payment of EMIs on the part of the petitioner in regard to the Loan Facility Agreement dated 27 January 2014.
• In conclusion it was said that the parties did not acted upon the earlier Award dated 9 June 2015. The respondent Bank tuned dishonest even after the installments were duly paid. They did not show a correct picture of their Statement of Accounts with respect to the payments made by the petitioner from time to time.
• Due to this existing dispute, the petitioner invoked arbitration. It was submitted that the application was without merit and is liable to be dismissed.

QUESTIONS RAISED

• Whether the Court had any jurisdiction to “review” an award which is given under Section 11 of the Arbitration and Conciliation Act?
• Whether a second arbitration petition in respect of the same dispute is maintainable?
• Whether the dispute in hand is not referable to arbitration as has been held in the impugned Award?

ARGUMENTS ADVANCED BY THE APPELLANT

• The learned counsel for the appellant submitted that the scope of review is twofold. The first one is with regard to procedural aspects and the second one is in respect to the substantive observations made in the impugned Order. The impugned order has been assailed purely on technical/procedural ground of reliance. It has also been placed on an overruled judgement and thus the review was maintainable.
• The petitioner further argued that in the latest judgement given by the Apex Court in Vidya Drolia has observed that action taken under the SARFAESI Act, 2002 was not amenable to arbitration. This Court has over ruled this judgement and has relied upon HDFC (supra). Hence, this is an error which is apparent on the face of the record as reliance was placed upon an overruled judgement.
• The counsel for the petitioner further argued that the Order was erroneous in observing the earlier Arbitration Award of 2015 and does not bar the present petition for invoking fresh arbitration.

ARGUMENTS ADVANCED BY THE RESPONDENT

• The respondent counsel took a preliminary objection and said that there was no provision for review of the Orders made under the Arbitration and Conciliation Act 1996. They placed reliance upon Kushraj Bhatia vs. M/s. DLF Power & Services Ltd. (2022/DHC/005349) and submitted that the present application was rejected out rightly.
• The respondent counsel further argued that there was no reference to the proceedings under the SARFAESI Act, 2002 in the case of Vidya Drolia.
• The learned counsel submitted that even though HDFC(Supra) has been overruled, M.D. Frozen (Supra) has not been overruled which clearly provides that the proceedings can be undertaken by way of arbitration in respect of a matter which is also a subject matter under the SARFAESI Act, 2002. While stating this, the counsel placed reliance upon M.D. Frozen (Supra) and India Bulls Housing Limited vs. Deccan Chronicals and others [(2018) 14 SCC 783].

ANALYSIS OF THE COURT

• The Court observed that it did not had any jurisdiction to review the present order which was given under Section 11 of the Arbitration and Conciliation Act.
• It was observed that the grounds raised for review were in the realm of Appeal as the findings of this Court have been challenged. This cannot be brought within the scope of “error apparent on the face of the record” and the impugned Order is not amenable to Review.
• The Court observed that the respondent cannot be left remedy less.
• The Court mentioned the case of M.D. Frozen Foods Exports Private Limited and Others v. Hero Fincorp Limited [(2017) 16 SCC 741] and Indiabulls Housing Finance Limited v. Deccan Chronicle Holdings Limited and Others [(2018) 14 SCC 783], and stated that prior arbitration proceedings are not a bar to proceedings under the NPA Act. It also held that the present petition does not fall within the ambit of the present review.
• The Court put reliance on the case of HDFC Bank Ltd v. Satpal Singh Bakshi (2012 SCC OnLine Del 4815) in analyzing the disputes that can be referred to arbitration under Arbitration and Conciliation Act. However, it was overruled in Vijay Drolia Case and hence suffers from an error that needs to be reviewed. But, in this case the petitioner took that objection and specifically dealt that when an issue has been agitated and has been answered, it becomes amenable to appeal.
• The Court summed up the entire argument and stated three points-

1. The review petition was not maintainable under law,
2. The grounds for review as agitated in the application were more in the realm of appeal and not amenable to review.
3. There was no error apparent on face of record nor are the findings in contravention of the observations made in Vidya Drolia (Supra) which was the main ground for seeking review.

• The Court thereby dismissed the appeal as there was no merit.

CONCLUSION

Competent jurisdiction is a very important topic when it comes to the case of Courts. In India, the Courts strictly maintain this but the parties always have the liberty to file the case again under the competent jurisdiction.

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