Arbitration Agreement Valid Over Pending RDB Act Proceedings.

Amrit Jal Ventures Private Limited Versus SREI Infrastructure Finance Limited

Amrit Jal Ventures Private Limited Versus SREI Infrastructure Finance Limited - TMI Issues Involved:
1. Validity of arbitration proceedings when a proceeding under Section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (RDB Act) is pending.
2. Jurisdiction of the Debt Recovery Tribunal (DRT) versus arbitration.
3. Applicability of Sections 5 and 8 of the Arbitration and Conciliation Act, 1996 in the context of the RDB Act.
4. Impact of Section 34 of the RDB Act and Section 34 of the SARFAESI Act on arbitration agreements.
5. Precedent value of previous judgments and their binding effect.

Detailed Analysis:

1. Validity of Arbitration Proceedings:
The central issue was whether an arbitration proceeding could be initiated based on an arbitration clause in an agreement when a proceeding under Section 19 of the RDB Act was pending before the DRT. The petitioner argued that the parties had voluntarily agreed to arbitration, invoking Sections 5 and 8 of the Arbitration and Conciliation Act, 1996, which precluded the Tribunal from proceeding with the Bank's application under Section 19 of the RDB Act. The petitioner relied on precedents affirming the right to arbitration despite the RDB Act, including decisions in HDFC Bank Ltd. Vs. Bhagwandas Auto Finance Limited and Nahar Industrial Enterprises Limited Vs. Hong Kong and Shanghai Banking Corporation.

2. Jurisdiction of DRT versus Arbitration:
The respondent contended that the RDB Act is a special statute, and all disputes within its purview must be adjudicated by the DRT. They emphasized that Section 34 of the RDB Act and Section 34 of the SARFAESI Act barred arbitration for disputes falling within the jurisdiction of the DRT. The respondent cited the decision in Union of India & Ors. Vs. Alok Kumar, which interpreted 'other authority' in Section 18 of the RDB Act to include arbitrators.

3. Applicability of Sections 5 and 8 of the Arbitration and Conciliation Act, 1996:
The petitioner argued that the arbitration proceeding commenced before the Bank's application under Section 19 of the RDB Act and that the Bank had waived its right to object by participating in the arbitration proceedings and accepting payments. The petitioner cited the decision in HDFC Bank Ltd. (supra), which held that a proceeding under Section 9 of the Arbitration and Conciliation Act, 1996, is not precluded by the filing of a recovery proceeding under the RDB Act.

4. Impact of Section 34 of the RDB Act and Section 34 of the SARFAESI Act:
The respondent argued that these sections rendered the arbitration clause invalid and unenforceable, as they barred any authority, including an arbitrator, from adjudicating disputes within the DRT's jurisdiction. They referenced the decision in Surya News Print & Papers Pvt. Ltd. Ghantasala & Ors. Vs. Branch Manager, State Bank of India, which held that the SARFAESI Act and RDB Act prevail over the Arbitration and Conciliation Act.

5. Precedent Value of Previous Judgments:
The petitioner argued that the judgments in HDFC Bank Ltd. and other cases remained binding precedents unless set aside by the Supreme Court. The Court agreed, stating that the decision of a Coordinate Bench, affirmed by the Division Bench, remains binding unless overturned by the Supreme Court. The Court emphasized judicial propriety and discipline, citing Shree Chamundi Mopeds Ltd. Vs. Church of South India Trust Association, Madras, which distinguished between quashing an order and staying its operation.

Conclusion:
The Court concluded that the arbitration agreement was valid and enforceable, notwithstanding the pending proceedings under the RDB Act. It held that the DRT's jurisdiction does not preclude arbitration, especially when the arbitration proceeding commenced before the DRT application. The Court appointed an arbitrator and directed the arbitration to proceed, emphasizing the binding nature of the precedents cited by the petitioner.