Effect Of Arbitration Agreement Vis A Vis The Jurisdiction Of Specialised Tribunals

The question of jurisdiction of specialized tribunals over the disputes arising out of the agreement where the parties thereto have agreed for arbitration as their dispute resolution mechanism has been in much debate and interpreted by various courts on various occasions. To understand the arbitration and the intent of the legislature for such enactment, one can refer to the preamble of the Act. The preamble of the Arbitration Act, 1996 reads as follows:

"An Act to consolidate and amend the law relating to domestic arbitration, international commercial arbitration and enforcement of foreign arbitral awards as also to define the law relating to conciliation and for matters connected therewith or incidental thereto.

WHEREAS the United Nations Commission on International Trade Law (UNCITRAL) has adopted the UNCITRAL Model Law on International Commercial Arbitration in 1985:

AND WHEREAS the General Assembly of the United Nations has recommended that all countries give due consideration to the said Model Law, in view of the desirability of uniformity of the law of arbitral procedures and the specific needs of international commercial arbitration practice;

AND WHEREAS the UNCITRAL has adopted the UNCITRAL Conciliation Rules in 1980;

AND WHEREAS the General Assembly of the United Nations has recommended the use of the said Rules in cases where a dispute arises in the context of international commercial relations and the parties seek an amicable settlement of that dispute by recourse to conciliation;

AND WHEREAS the said Model Law and Rules make significant contribution to the establishment of a unified legal framework for the fair and efficient settlement of disputes arising in international commercial relations;

AND WHEREAS it is expedient to make law respecting arbitration and conciliation, taking into account the aforesaid Model Law and Rules;"

Arbitration is an alternate dispute resolution mechanism incorporated to have a speedy and out of court fair and efficient settlement of disputes arising in international commercial relations where the parties to the transaction seek an amicable settlement of that dispute by recourse to conciliation.

The preamble itself suggests that Arbitration is a right in personam which binds two parties agreeing to opt for such mechanism for dispute resolution. According to Black's Law Dictionary, Arbitration is a method of dispute resolution involving one or more neutral third parties.

Alternatively, for certain disputes arising between the parties covered and governed by special enactments, there are special courts/tribunals constituted under such enactments where the parties can approach in case of disputes arisen between them. The examples of the same would be Debt Recovery Tribunal constituted under the provisions of The Recovery of Debts Due to banks and Financial institutions Act, 1993, Central Administrative Tribunal and State Administrative Tribunals constituted under the Administrative Tribunals Act, 1985 to deal with the Service matters of the civil servants and employees of public bodies/ authorities, Armed Forces Tribunal constituted under the Armed Forces Tribunal Act, 2007 to decide the disputes of defence personnel etc. It would be pertinent to mention here that such enactments generally have the exclusion jurisdiction set out with a notwithstanding clause mentioned in such acts. Such enactments set out the exclusivity of the disputes governed by such acts to be dela6 with the specialized forums constituted to decide on such disputes.

In the present article we deal with the arbitrability of disputes arisen amongst the banks and the borrowers in the light of the Judgments of the Full Bench of the Hon'ble Delhi High Court in HDFC Bank v. Satpal Singh Bakshi, as to whether the remedy of arbitration stands excluded in cases where specific tribunals are set up to decide the disputes between the same parties, more particularly in view of the exclusion of jurisdiction clauses set out in such acts. Or in other words; which of the two enactments, i.e. Arbitration Act and The Recovery of Debts Due to Banks and Financial Institutions Act (hereinafter referred to as the 'Debt Recovery Act') is to prevail over the other.

The Full Bench of the Hon'ble Delhi High Court in HDFC Bank v. Satpal Singh Bakshi while inter alia deciding the issue stated above set out a distinction between what is arbitrable and what is not arbitrable in the light of Right in rem and right in personam. Right in rem means a right, often negative, exercisable against the world at large1. Whereas, Right in personam; means an interest protected solely against specific individuals2.

During the course of hearing of the said Judgment, the counsel representing bank inter alia referred to a judgment of Division Bench of Hon'ble Delhi High Court in Kohinoor Creations and Ors. Vs. Syndicate Bank 2005 (2) ARBLR 324 Delhi; wherein it has been inter alia held that in view of the provisions of section 34 of the Debt Recovery Act, the provisions of the Arbitration Act stand excluded. In coming to this conclusion, specific emphasis was laid on sub-section (2) of Section 34 of the RDB Act. Section 34 of the RDB Act reads as under:-

"34. Act to have over-riding effect-

(1) Save as otherwise provided in sub-section(2), the provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law other than this Act.

(2) The provisions of this Act or the rules made there under shall be in addition to, and not in derogation of the Industrial Finance Corporation Act, 1948, the State Financial Corporation Act, 1951, the Unit Trust of India Act, 1963, the Industrial Reconstruction Bank of India Ltd., 1984, the Sick Industrial Companies (Special Provisions) Act, 1985 and the Small Industries Development Bank of India Act, 1989."

The counsel representing bank further contended that Section 17 of the Recovery of Debts Due to banks and Financial institutions Act, 1993 (the Act) makes it clear that the Debt Recovery Tribunal (DRT) alone is to decide the applications of the Banks and Financial Institutions for recovery of debts due to them. Also, Section 18 of the Act clearly bars the jurisdiction of any other court, except High Court and Supreme Court, from entertaining matters specified in Section 17. Furthermore, Section 31 of the Act transfers all such cases pending before any...