Bombay High Court
Idfc First Bank Ltd. ( Formerly Known As ... vs Bell Finvest India Ltd. And Anr on 14 December, 2021
Author: Madhav J. Jamdar
Bench: G.S. Patel, Madhav J. Jamdar
30-ASWP-7348-2021-O.DOC
Shephali/Priya
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
Digitally
signed by WRIT PETITION NO. 7348 OF 2021
PRIYA
PRIYA RAJESH
RAJESH SOPARKAR
SOPARKAR Date:
2021.12.15
12:40:42
+0530 IDFC First Bank Ltd (Formerly known as IDFC ...Petitioner
Bank Ltd)
Versus
Bell Finvest India Ltd & Anr ...Respondents
Mr Rahul Lakhiani, with Smruti Jha, i/b Juris Corp, for the
Petitioner.
Mr AI Patel, Add.GP, with RP Kadam, AGP, for Respondent-State.
CORAM G.S. Patel &
Madhav J. Jamdar, JJ.
DATED: 14th December 2021
PC:-
1. On 29th November 2021, in Writ Petition No. 1875 of 2021, the present Petitioner, IDFC First Bank Ltd was the 2nd Respondent. That was also a case where challenge was led to the appointment and jurisdiction of an Arbitrator inter alia on the basis of the Supreme Court decision in Vidya Drolia and Ors v Durga Trading Corporation.1 We issued rule and then in paragraphs 2 to 6 of that order we said:
"2. The Petition raises a very serious question about the manner in which the 2nd Respondent, IDFC First Bank 1 (2021) 2 SCC 1 Page 1 of 4 14th December 2021 30-ASWP-7348-2021-O.DOC Limited, a scheduled bank has, contrary to several squarely applicable decisions of the Supreme Court, proceeded in an arbitration for recovery of its dues. Shorty stated, it has purported to unilaterally appoint an arbitrator, the 3rd Respondent. This is directly contrary to the present state of the law as summarised in Lite Bite Foods Pvt Ltd v AAI,2 following the decisions in Perkins Eastman Architect DPC & Anr vs HSSC (India) Ltd;3 Voestalpine Schienen GmbH v Delhi Metro Rail Corporation Ltd;4 and TRF Limited v Energo Engineering Products Ltd.5
3. It is now well settled that in current state of Arbitration Law there are only two methods of appointing or constituting an Arbitral Tribunal. The first is by consent of parties. The second is under an order of a Court under Section 11 of the Arbitration and Conciliation Act, 1996. There is no third avenue. Unilateral appointments are specifically barred and certainly in this manner where the Arbitrator is named by one side without any consent of the other.
4. The second issue is that the entire invocation is contrary to the decision of a three-Judge Bench of the Supreme Court in Vidya Drolia and Anr v Durga Trading Corporation.6 In paragraphs 55 to 58 and 78 the Supreme Court after an elaborate review of the case law held that disputes that are to be adjudicated by the Debts Recovery Tribunal under the Debts Recovery Tribunals Act, and this would include claims under the RDDBI Act and the SARFAESI Act, are non-arbitrable. This is the express finding in paragraph 78. Paragraphs 55 to 58 deal with the
2 2019 SCC OnLine Bom 5163.
3 2019 (9) SCC OnLine SC 1517.
4 (2019) 4 SCC 665.
5 (2017) 8 SCC 377.
6 (2021) 2 SCC 1.
Page 2 of 414th December 2021 30-ASWP-7348-2021-O.DOC doctrine of election to select arbitration as an alternative dispute resolution mechanism. In paragraph 58, the Supreme Court held that non-arbitrability may arise in cases where there is an implicit prohibition in the statute conferring and creating special rights to be adjudicated by Courts/public fora, which rights, including enforcement orders/provisions cannot be enforced and applied in case of arbitration. It went on to hold that the claims of banks and financial institutions covered under DRT Act cannot be said to be arbitrable. If they were held to be arbitrable, this would deny these banks and deprive them of specific rights including modes of recovery specified in the DRT Act. Therefore, the Supreme Court said, claims covered by the DRT Act are non-arbitrable. There is a prohibition against waiver of jurisdiction of the DRT by necessary implication. There is no possible ambiguity about this finding. The next sentence in paragraph 58 is even more emphatic. It says "the legislation has overwritten the contractual right to arbitration".
5. We note this because in our view there is a prima facie no possibility of whatsoever of the 3rd Respondent continuing with the arbitration. There is no room for the 2nd Respondent to say that unless there is a stay granted in this Writ Petition the arbitration will continue. That Arbitrator is presently acting wholly without jurisdiction. His appointment is prima facie not good in law.
6. For all these reasons, we grant stay of arbitration in terms of prayer clause (d) at pages 39 and 40 which reads as follows:
"(d) that pending the admission/hearing and final disposal of the present Petition, this Hon'ble Court be pleased to pass a temporary order and injunction restraining Respondent Nos. 2 and 3 by themselves, their officers, Page 3 of 4 14th December 2021 30-ASWP-7348-2021-O.DOC servants, agents and/or assigns from in any manner taking any steps whatsoever in furtherance of (i) letters dated 16th July 2021 under which Respondent No.3 was appointed as the Sole Arbitrator by Respondent No.2 (Exhibits 'N' and 'S' hereto) and (ii) letter dated 27th July 2021 addressed by Respondent No.3 (Exhibit 'V' hereto);"
2. In the present matter, it is IDFC that questions the jurisdiction of the arbitral tribunal, and, indeed, the very same Arbitrator.
3. We issue Rule and grant interim reliefs in terms of prayer clause (d), which reads thus:
"(d) Grant stay on the arbitral proceedings ongoing before the Ld. Sole Arbitrator during the pendency and till disposal of the present Petition."
4. List this matter along with Writ Petition No. 1875 of 2021 on 15th December 2021.
5. All concerned will act on production of a digitally signed copy of this order.
(Madhav J. Jamdar, J) (G. S. Patel, J)
Page 4 of 4
14th December 2021