Case Note & Summary
The Bombay High Court dismissed a writ petition filed by Harvestdeal Securities Ltd. challenging an order of the Debt Recovery Appellate Tribunal (DRAT) dated 19 February 2015. The respondent, Punjab National Bank (PNB), had filed Original Application No. 100 of 2005 under Section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (RDDB Act) before the Debt Recovery Tribunal (DRT), Mumbai, seeking recovery of Rs.94,36,041/-. The petitioner filed a written statement raising several defences, including that the claim was barred by limitation and that due to an arbitration clause in the contract, the Stock Exchange Mumbai Arbitration Forum had jurisdiction. The DRT, by a cryptic order dated 9 September 2009, entertained the preliminary objection and held that the parties should be referred to arbitration, granting leave to PNB to withdraw the application and submit to arbitration. PNB appealed to the DRAT, which allowed the appeal, set aside the DRT's order, and remitted the matter to the DRT for determining the petitioner's liability. The DRAT also noted that the claim was for a substantial amount and that the petitioner's limitation plea could be considered by the DRT. The petitioner challenged this order before the High Court under Articles 226 and 227 of the Constitution. The High Court held that the DRT has exclusive jurisdiction over recovery claims under the RDDB Act and cannot refer parties to arbitration, as the arbitration clause does not oust the DRT's jurisdiction. The court found no error in the DRAT's order and dismissed the petition, directing the DRT to decide the matter expeditiously, preferably within six months, and to consider all defences including limitation.
Headnote
A) Debt Recovery - Jurisdiction - Arbitration Clause - Recovery of Debts Due to Banks and Financial Institutions Act, 1993, Section 19 - The DRT has exclusive jurisdiction over recovery claims filed by banks under the RDDB Act, and an arbitration clause in the contract cannot oust such jurisdiction. The DRT's order referring parties to arbitration was set aside as it lacked jurisdiction to do so. (Paras 1-5)
B) Debt Recovery - Limitation - Remand - Recovery of Debts Due to Banks and Financial Institutions Act, 1993, Section 19 - The DRAT, while setting aside the DRT's order, remitted the matter for determination of liability, and the petitioner's plea of limitation can be considered by the DRT on remand. (Paras 5-6)
Issue of Consideration
Whether the Debt Recovery Tribunal (DRT) can refer parties to arbitration in a recovery application under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, despite an arbitration clause in the contract.
Final Decision
The High Court dismissed the writ petition, upholding the DRAT order dated 19 February 2015. The DRT was directed to decide the matter expeditiously, preferably within six months, and to consider all defences including limitation.
Law Points
- Debt Recovery Tribunal has exclusive jurisdiction over recovery claims under RDDB Act
- 1993
- arbitration clause cannot oust jurisdiction
- DRAT can consider limitation issue on remand
Case Details
2016 LawText (BOM) (03) 30
Writ Petition No. 346 of 2016
D. H. Waghela, C. J., M. S. Sonak, J.
Mr. Chirag Mody with Mr. Jayesh Mestry i/b. RMG Law Associates for petitioner, Ms Jinal Gogri with Mr. Vikrant Makhare with Ms Rutuja Patil i/b. Negandhi, Shah & Himayatullah for respondent
Harvestdeal Securities Ltd.
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Nature of Litigation
Writ petition under Articles 226 and 227 of the Constitution challenging order of Debt Recovery Appellate Tribunal (DRAT) which set aside Debt Recovery Tribunal's (DRT) order referring parties to arbitration.
Remedy Sought
Petitioner sought to quash DRAT order dated 19 February 2015 and restore DRT order dated 9 September 2009.
Filing Reason
Petitioner challenged DRAT order that set aside DRT's order referring parties to arbitration and remitted matter to DRT for determination of liability.
Previous Decisions
DRT by order dated 9 September 2009 held that parties be referred to arbitration; DRAT by order dated 19 February 2015 allowed appeal, set aside DRT order, and remitted matter to DRT.
Issues
Whether DRT can refer parties to arbitration in a recovery application under RDDB Act, 1993 despite an arbitration clause.
Whether DRAT erred in setting aside DRT's order and remitting matter for determination of liability.
Submissions/Arguments
Petitioner argued that DRT correctly referred parties to arbitration as per contract note.
Respondent argued that DRT has exclusive jurisdiction under RDDB Act and cannot refer to arbitration.
Ratio Decidendi
The Debt Recovery Tribunal has exclusive jurisdiction over recovery claims under the RDDB Act, 1993, and an arbitration clause in a contract cannot oust such jurisdiction. The DRT cannot refer parties to arbitration in a recovery application.
Judgment Excerpts
By this petition under Articles 226 and 227 of the Constitution of India, the petitioner has challenged order dated 19 February 2015 made by the Debt Recovery Appellate Tribunal (DRAT).
The DRT, by cryptic order dated 9 September 2009, at a stage when the matter was posted for final arguments, entertained the preliminary objection raised by the petitioner and has held that the parties are required to be referred to arbitration, as envisaged in the contract note.
The DRAT has, by the impugned order dated 19 February 2015, allowed the appeal, set aside the DRT's order dated 9 September 2009 and remitted the matter to the DRT for determining the liability of the petitioner.
Procedural History
PNB filed Original Application No. 100 of 2005 before DRT, Mumbai under Section 19 of RDDB Act. Petitioner filed written statement on 7 March 2006 raising preliminary objection regarding arbitration clause. DRT by order dated 9 September 2009 referred parties to arbitration. PNB appealed to DRAT in Appeal No. 310 of 2009. DRAT by order dated 19 February 2015 allowed appeal, set aside DRT order, and remitted matter to DRT. Petitioner filed Writ Petition No. 346 of 2016 before Bombay High Court challenging DRAT order.
Acts & Sections
- Recovery of Debts Due to Banks and Financial Institutions Act, 1993: Section 19
- Constitution of India: Articles 226, 227
