2004 (12) TMI 401 - HC - Companies Law

Borrower Not Eligible for Arbitration under Securitization Act

The Court ruled that the applicant, a borrower, could not maintain an Arbitration Application under the Arbitration Act for appointment of an arbitrator ... Resolution of disputes, Arbitrators - Appointment of Issues:1. Dispute regarding mis-adjustments and wrongful debits made by the Bank to the loan account.2. Applicability of arbitration clause in resolving disputes under the Securitization Act.Analysis:1. The applicant, a loanee of the Bank, alleged mis-adjustments and wrongful debits to the loan account without furnishing bills as per Bank norms. Despite complaints and representations, the Bank did not rectify the issue. The applicant approached the Banking Ombudsman, but the complaint was rejected due to the Bank's issuance of a notice under the Securitization Act for recovery. The applicant filed an application under the Arbitration Act, citing the arbitration clause in the Securitization Act for resolution of disputes.2. The Court examined the provisions of the Securitization Act, particularly section 11, which allows for arbitration in disputes among specified parties related to securitization, reconstruction, or non-payment of dues. The Act limits arbitration to disputes involving the bank, financial institution, securitization company, reconstruction company, or qualified institutional buyer. As the applicant did not fall within these defined categories and lacked a written arbitration agreement with the Bank, the Court held that the applicant could not maintain an Arbitration Application under the Arbitration Act for appointment of an arbitrator.3. Furthermore, to be eligible for invoking arbitration under the Securitization Act, the applicant needed to be categorized as a 'bank,' 'financial institution,' 'securitization company,' 'reconstruction company,' or 'qualified institutional buyer.' Since the applicant was solely a borrower and not registered as a securitization or reconstruction company under the Act, he was not entitled to invoke the arbitration provisions. The Court upheld the objection raised by the Registry, ruling that the applicant's Arbitration Application, seeking resolution through arbitration, was not maintainable and subsequently rejected it.