L.MOHAPATRA, J & C.R.DASH, J. W.P.(C ) NOS.9040, 9041 OF 2009 (Decided on 22.12.2010) M/S. BERHAMPUR COLD STORAGE (P) LTD. & ORS. ……… Petitioners. .Vrs. ICICI BANK LTD. & ANR. ………. Opp.Parties. RECOVERY OF DEBTS DUE TO BANKS & FINANCIAL INSTITUTIONS ACT, 1993 For Petitioners - M/s. Milan Kanungo, D.Pradhan, Y.Mohanty, S.K.Mishra, S.N.Das, B.P.Pattanaik & B.B.Panda. For Opp.Parties – M/s. R.K.Mohanty, Rajit Ray, S.K. Singh, R.K.Mohanta, N.Hota, A.Pradhan & B.R.Behera. C.R.DASH, J. Contents and relief(s) claimed in both the writ petitions being same, they are taken up together for disposal by this common order. 2 Whether the Debt Recovery Tribunal, Cuttack (‘D.R.T.’in short) (opp.party no.2 in both the writ petitions) lacks jurisdiction to entertain Original Application No.96 of 2009 (defendants whereof are the petitioners in W.P.(C ) No.9040 of 2009) and Original Application No.88 of 2009 (defendants whereof are the petitioners in W.P.(C) No.9041 of 200(0 is the sole question that arises for consideration in the present writ petition. 3 Defendants in O.A. No.96 of 2009 and defendants in O.A. No.88 of 2009 filed different Misc. Applications raising the issue of lack of jurisdiction by the D.R.T., Cuttack to entertain the aforesaid Original Applications filed by the present opposite party no.1 – Bank seeking issuance of Recovery Certificates. They passed for deciding the issue of jurisdiction as a preliminary issue and prayed for stay of the proceedings in both the O.As. direction the parties to seek for settlement of their dispute by arbitration in view of existence of Arbitration Clause in the agreement between opposite party no.1 –Bank and petitioner no.1 to 6 in W.P.(C ) No.9040 of 2009 (defendant nos.1 to 6 before the D.R.T.) as well as between the opposite party no.1 – Bank and petitioner nos. 1 to 6 in W.P.(C ) No.9041 of 2009 (defendant nos. 1 to 6 before the D.R.T.), issue raised in all the M.As. arising out of the aforesaid O.As. being same, learned D.R.T., Cuttack disposed of the same by common order dated 17.06.2009 passed separately in both the O.As., and rejected the claim of the present petitioners. Said common order dated 17.06.2009 passed in the M.As. arising out of O.A. Nos.96 of 2009 and 88 of 2009 have been impugned in the present writ petitions. 4 Facts relevant in W.P.(C ) No.9040 of 2009 are as follows – Opposite party no.1 – Bank entered into a Management and Collection Agreement (M & C Agreement) vide Annexure-2/A with petitioner nos.1 to 6 (defendant nos. 1 to 6 before the D.R.T., Cuttack) on 07.09.2005 appointing petitioner nos.1 to 6 as its Management & Collection Agent (M & C Agent) as well as Warehousing Management Agent (W.M.A.). As per the agreement vide Annexure-2/A, it was the duty of petitioner nos. 1 to 6 to identify borrowers for Warehouse Receipt Based Financing Scheme (W.R.B.F. Scheme) for extending agricultural loans. Petitioner nos.7 to 13 (defendants no.7 to 13 before the D.R.T., Cuttack) are the persons, to who opposite party no.1 – Bank extended financial assistance as loan for a period of 12 months under the W.R.B.F., Scheme. Loans were advanced to petitioner nos. 7 to 13 keeping their agricultural produces as security, which were pledged on lien basis to opposite party no.1 – Bank in accordance with the W.R.B.F. Scheme. Petitioner nos. 1 to 6 being the M & C Agents had the duty to identify the borrowers, keep the agricultural produces pledged by the borrowers in their godowns / warehouses and purchase the produces as and when required in accordance with the scheme. They (petitioner nos. 1 to 6) were not recipients of any loan from the opposite party no.1 – Bank. Opposite party no.1 – Bank filed O.A. No.96 of 2009 seeking issuance of a Recovery Certificate for a sum of Rs.23,35,01,220/- (twenty-three crores thirty-five lakhs one thousand two hundred twenty) claiming that all the petitioners were jointly and severally liable to repay the aforesaid amount. Same is the fact in W.P.(C ) No.9041 of 2009, where petitioner nos. 1 to 6 (defendants no.1 to 6 before the D.R.T.) are the M & C Agents under the W.R.B.F. Scheme and petitioners nos. 7 to 10 (defendants no.7 to 10 before the D.R.T.) are the individual borrowers under the said scheme. 5. In both the O.As. the defendants (petitioners in both the writ petitions) filed Misc. Applications questioning jurisdiction of the D.R.T., Cuttack on the following grounds – (I) The basis of the proceeding before the D.R.T., Cuttack by opposite party no.1 – Bank being the M & C Agency Agreement (filed as Annexure-2/A in both the writ petitions), the Tribunal is completely devoid and deprived of any jurisdiction in view of Clause-39 of the said Agreement (Annexure-2/A) providing for settlement of all disputes arising between the parties pertaining to or arising out of the agreement in accordance with the Arbitration and Conciliation Act, 1996, subject to exclusive jurisdiction of Courts at Mumbai. (II) In the Civil Suit bearing C.S. No.87 of 2008 filed by defendant nos. 7 and 8 in O.A. No.88 of 2009 and in C.S. No.88 of 2008 filed by defendant no.6 in O.A. No.96 of 2009 before the competent Court at Berhampur, the Bank, without filing a written statement, took a stand that the Suits were not maintainable in view of the Arbitration Clause, i.e., Clause-39 in Annexure-2/A. (III) There have been various correspondence between the parties depicting suggestion and acceptance of names of sole arbitrators prior to filing of the original applications. 3. Opposite party no.1 – Bank objected to the claim of the petitioners before the D.R.T. on the ground that in view of Section 34 of the Recovery of Debts due to Banks and Financial Institutions Act, 1993 (‘R.D.B. Act’ in short). Which given overriding effect to the said Act as against other remedies, opposite party no.1 – Bank was within it s competence to move the D.R.T., Cuttack for issue of Recovery Certificate in both the O.As. and the D.R.T. alone has the exclusive jurisdiction to try the claims. 4. Learned D.R.T., Cuttack, on consideration of the contentions raised by learned counsels for the parties, found exclusive jurisdiction with it to try the claim of opposite 2 party no.1 – Bank in view of overriding effect of Section 34 of the R.D.B. Act and dismissed the Misc. Applications filed by the defendants. 5. Mr. Kanungo, learned counsel for the petitioners in both the writ petitions reiterates the same contentions, as were raised before the D.R.T., Cuttack. He lays stress primarily on Clause-39 of the M & C Agreement in Annexure-2/A in both the writ petitions providing for settlement of dispute by arbitration and conduct of the opposite party no.1 – Bank in invoking Clause-39 of Annexure-2/A to get C.S. No.87 of 2008 and C.S. No.88 of 2008 dismissed on the basis of said arbitration clause, i.e. Clause-39 in Annexure- 2/A. Referring to order dated 04.01.2008 passed by Hon’ble the Chief Justice of this Court on a petition filed by some of the defendants under Section 11 (6) of the Arbitration and Conciliation Act, 1996, Mr. Kanungo, learned counsel for the petitioners submits that the order dated 04.01.2008 so passed shows that the Hon’ble Chief Justice was of the opinion that the dispute between the parties should be referred to the Arbitration though, of course, by a competent Court. Opposite Party no.1 – Bank having not questioned maintainability of the Arbitration Proceeding before Hon’ble the Chief Justice, subsequent filing of the aforesaid O.As. by it (Bank) before the D.R.T. is barred by the principles of constructive res judicata. It is further submitted by Mr. Millan Kanungo, learned counsel for the petitioners that opposite party no.1 – Bank in a Notice under Section 11 of the Arbitration and Conciliation Act, 1996, which is dated 21.04.2008 addressed to defendant nos. 1 to 6 in O.A. No.88 of 2009, called upon to approve appointment of any one of three retired judges of this Court as sole arbitrator to resolve the dispute as early as possible in terms of Clause-39 of the M & C Agreement. Lastly, it is submitted by Mr. Kanungo, learned counsel for the petitioners that Arbitration and Conciliation Act, 1996 being a later Special Act, the non-abstante clause in Section 5 thereof giving overriding effect to the provision of the Act shall prevail over the R.D.B. Act, which is a former Special Act. He relies on the case of The Industrial Credit and Investment Corporation of India Limited and etc. v. Vanjinad Leathers Ltd. and etc., AIR 1997 Kerala 273 and Solidaire India Ltd. vs. Fair Growth Financial Services Ltd. and others, 1 (2001) BC 656 (SC) to substantiate such contention. 6. Mr. R.K. Mohanty, learned counsel for opposite party no.1 – Bank on the other hand oppugns the contention raised by Mr. Kanungo, learned counsel for the petitioners on the ground that the D.R.T., Cuttack has got exclusive jurisdiction so far as the present dispute is concerned and no other remedy can be resorted to by the Bank in view of overriding effect of Section 34 of the R.D.B. Act. He relies on the case of Allahabad Bank vs. Canara Bank and another, (2000) 4 SCC 406 to substantiate his contention that the jurisdiction of the D.R.T. to adjudicate the dispute between the parties is exclusive. He further relies on the case of Kohinoor Creations and others vs. Syndicate Bank, 121 (2005) D.L.T. 241 to substantiate his contention that irrespective of existence of Arbitration Clause in the agreement between the concerned opposite parties and the Bank, jurisdiction of the Debt Recovery Tribunal constituted under the R.D.B. Act is not ousted by such Arbitration Clause. 7. Which of the two Acts would prevail ? Whether the provisions of Arbitration and Conciliation Act 1996 (‘Arbitration Act’ for short) override the R.D.B. Act is the question raised by the parties. Mr. Kanungo, learned counsel for the petitioners takes up through different judicial pronouncements and especially Sections 5 and 8 of the Arbitration Act and Section 34 of the R.D.B. Act to submit that both the statutes being Special Statutes and the Arbitration Act being a later statute, non-abstante clause in Section 5 of the 3 Arbitration Act has to have over-riding effect irrespective of existence of a non-abstante clause in Section 34 of the R.D.B. Act. Mr. R.K.Mohanty, learned counsel for the opposite parties on the other hand takes up through different judicial pronouncements and different provisions of the R.D.B. Act including Section 34 thereof to contend that the D.R.T. has exclusive jurisdiction under the R.D.B. Act to try any dispute involving dues of a Bank or Financial Institution and even existence of arbitration clause in the agreement between the parties can not affect the exclusive jurisdiction of D.R.T. constituted under R.D.B. Act 11. Basis of present dispute between the parties is the existence of the Arbitration Clause, i.e., Clause-39 in the agreement between the parties vide Annexure-2/A. said Clause-39 reads thus – “ All disputes between the parties here to pertaining to or arising out of this agreement shall be settled by the parties in accordance with the Arbitration and Conciliation Act 1996, as amended from time to time, and shall be subjected to exclusive jurisdiction of Courts at Mumbai.” The aforesaid Agreement vide Annexure-2/A was executed between the parties on 07.09.2005. By that time both the aforesaid statutes were operating in the field. Whether the aforesaid clause in the Agreement vide Annexure-2/A binds the parties is dependent on the questions – (1) whether the D.R.T. constituted under the R.D.B. Act has exclusive jurisdiction to try the dispute in question and (2) whether the agreement providing for arbitration clause, as aforesaid, takes away jurisdiction of the D.R.T. 12. The Supreme Court, considered the provisions of the R.D.B. Act in the case of Allahabad Bank vs. Canara Bank (supra) while dealing with adjudication regarding debts due to Banks or Financial Institutions and the exclusivity of the jurisdiction of the D.R.T. The Hon’ble Supreme Court held thus : “21. In our opinion, the jurisdiction of the Tribunal in regard to adjudication is exclusive. The RDB Act requires the Tribunal alone to decide applications for recovery of debts due to Banks or Financial Institutions ….. Under Section 18, the jurisdiction of any other court or authority which would otherwise have had jurisdiction but for the provisions of the Act, is ousted and the power to adjudicate upon the liability is exclusively vested in the tribunal. (This exclusion does not however apply to the jurisdiction of the Supreme Court or of a High Court exercising power under Articles 226, 227 of the Constitution). This is the effect of Section 17 and 18 of the Act. 22. We hold that the provisions of Section 17 and 18 of the RDB Act are exclusive so far as the question of adjudication of the liability of the defendant to the appellant Bank is concerned.” Hon’ble Supreme Court, in the aforesaid case, further held that process of the Debt Recovery Tribunal was superior, because it intended to provide a speedy and summary remedy for recovery of thousands of crores of rupees which were due to Banks and Financial Institutions. Hon’ble Supreme Court in the case of Union of India and another vs. Delhi High Court Bar Association and others, (2002) 4 SCC 275, has reiterated the same view in paragraph-4 of the judgment, which reads thus – 4 “4. ….. According to Section 18 of the Act, no court or other authority is entitled to exercise any jurisdiction, powers or authority in relation to matters in respect of which such jurisdiction, powers and authority are vested with the Tribunal. Section 18, however, provides that the bar on other Courts and authorities to entertain such disputes shall not in any way oust the jurisdiction of this Court or the High Courts in exercise of their jurisdiction under Articles 226 and 227 of the Constitution.” 2. The special machinery of the D.R.T. has been constituted as per the preamble of the R.D.B. Act, “for expeditious adjudication and recovery of debts due to banks and financial institutions and for matters connected therewith or incidental thereto”. In paragraph-24 of the judgment in Union of India vs. Delhi High Court Bar Association (supra), the Hon’ble Supreme Court has held thus – “24. The manner in which a dispute is to be adjudicated upon is decided by the procedural laws which are enacted from time to time. It is because of the enactment of the Code of Civil Procedure that normally all disputes between the parties of a civil nature would be adjudicated upon by the civil courts. There is no absolute right in anyone to demand that his dispute is to be adjudicated upon only by a civil court. The decision of the Delhi High Court proceeds on the assumption that there is such a right. As we have already observed, it is by reason of the provisions of the Code of Civil Procedure that the civil courts had the right, prior to the enactment of the Debts Recovery Act, to decide the suits for recovery filed by the banks and financial institutions. This forum, namely, that of a civil court, now stands replaced by a Banking Tribunal in respect of the debts due to the bank……” In view of the provisions contained in Sections 17, 18 and 19 of the R.D.B. Act and the aforesaid judicial pronouncement it is to be held that the Debt Recovery Tribunal has got exclusive jurisdiction in respect of debts which are in excess of rupees ten lakhs and for such a claim the D.R.T. becomes the original and obvious forum by a Bank or Financial Institution instead of a Civil Court. 14. Section 34 of the R.D.B. Act, which gives over-riding effect to the provisions of the Act as against any other law or instrument having effect by virtue of any law other than the R.D.B. Act, reads as follows :- “34. Act to have over-riding effect. – (1) Save as provided under 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 (15 of 1948), the State Financial Corporations Act, 1951 (63 of 1951), the Unit Trust of India Act, 1963 (52 of 1963), the Industrial Reconstruction Bank of India Act, 1984 (62 of 1984), the Sick Industrial Companies (Special Provisions) Act 1985 (1 of 1986) and the Small Industries Development Bank of India Act, 1989 (39 of 1989). A cursory reading of the aforesaid provisions makes it clear that the provisions of R.D.B. Act shall have over-riding effect not only against other law for the time being in force (except those statute saved by Sub-section 2) but also against any instrument having effect by virtue of any law other than the R.D.B. Act. The agreement between the 5 parties vide Annexure-2/A providing for the Arbitration Clause in Clause-39 is to be held as covered under ‘any instrument’ having effect by virtue of any law. We feel persuaded to take such a view in as much as Clause-39 being a part of a valid agreement vide Annexure-2/A can be said to have effect by virtue of the Contract Act and the Arbitration Clause vide Clause-39 in Annexure-2/A has the potentiality to bring the lis under the purview of the Arbitration Act. Section 34 as aforesaid sweeps the field and the R.D.B. Act shall have overriding effect not only against any other law for the time being in force but also against any agreement between the parties made in derogation of exclusivity of jurisdiction of the Tribunal constituted under the Act. Therefore, any agreement made in derogation of the R.D.B. Act shall not survive the sweep of Section 34 of the Act. It is, however, contended that in view of Clause-39 in Annexure-2/A, provisions of the Arbitration Act becomes applicable to the disputes between the parties and the Arbitration Act being a later special statute shall have to override the provisions of the R.D.B. Act. We keep this question alive for discussion at the appropriate stage. 15. Hon’ble Supreme Court, as back as in 1973 in the case of State of Uttar Pradesh and another vs. Janki Saran Kailash Chandra and another, A.I.R. 1973 SC 207, had held that mere existence of an arbitration clause in an agreement does not by itself create an obligation on the Court to stay the suit or to give any opportunity to the defendant to consider the question of enforcing the Arbitration Clause. The right to institute a suit in some Court is conferred on a person having a grievance of civil nature, under the General Law. The Arbitration Agreement does not by itself operate as a bar to the suit in the Court. In the case of Svenska Handelsbanken and others vs. Indian Charge Chrome Ltd. and others, (1994) 1 SCC 502, Hon’ble Supreme Court held thus – “51. When parties agree to have their disputes settled by arbitration it does not mean that both have bound themselves not to go to court to have the disputes settled. At page 163 of Russel on Arbitration, Twentieth Edn. It is stated that “a party to a contract to refer disputes to arbitration has a perfect right to bring an action in respect of those disputes, and the court has jurisdiction to try such disputes. Any provision to the contrary would be an ouster of the jurisdiction of the Courts. 52. Lord Macmillan in the House of Lords decision in Heyman v. Darwins Ltd. pointed out as under : I venture to think that not enough attention has been directed to the true nature and function of an arbitration Clause in a contract. It is quite distinct from the other clauses. The other Clauses set out the obligations which the parties undertake towards each other hinc inde. But the arbitration Clause does not impose on one of the parties an obligation in favour of the other. It embodies the agreement of both parties that, if any dispute arises with regard to the obligations which the one party has undertaken to the other, such dispute shall be settled by a tribunal of their own constitution. 53. It may be that even after entering into an arbitration Clause any party may institute legal proceedings. It is for the other party to seek stay of the suit by showing the arbitration Clause and satisfying the terms of the provisions of law empowering the court to stay the suit …” Though the aforesaid judgment was rendered by Hon’ble Supreme Court in the context of Arbitration Act, 1940, the principles laid down therein would hold good even 6 for the purpose of consideration of the question under the Arbitration Act, 1996. The Hon’ble Supreme Court, by the aforesaid judgment, we feel, has set down applicable legal principles, so far as effect of arbitration clause in an agreement and liberty of a party to such agreement to move the Court for settlement of dispute is concerned. 16. Reliance is placed by Mr. Millan Kanungo, learned counsel for the petitioners on Sections 5 and 8 of the Arbitration and Conciliation Act, 1996, which are extracted below for ready reference:- “5. Extent of judicial intervention: Notwithstanding anything contained in any other law for the time being in force, in matters governed by this part, no judicial authority shall intervene except where so provided in this Part. 8. Power to refer parties to arbitration where there is an arbitration agreement: (1) A judicial authority before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so applies not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration. (2.) The application referred to in sub-section (1) shall not be entertained unless it is accompanies by the original arbitration agreement or a duly certified copy thereof. (3.) Notwithstanding that an application has been made under sub-section (1) and that the issue is pending before the judicial authority, an arbitration may be commenced or continued and an arbitral award made.” It is the established principle that while examining a particular provision of a statute to find out whether the jurisdiction of a Court is ousted or not, the principle of universal application is that ordinarily the jurisdiction may not be held to be ousted unless the very statutory provision explicitly indicates or even by inferential conclusion the Court arrives at the same when such a conclusion is the only conclusion. The Arbitration and Conciliation Act, 1996 does not contain any provision explicitly ousting jurisdiction of a Court except what is provided in Section 5, and Section 8 thereof does not restrict right of a party to maintain a suit in express term, rather it confers primacy on the Court to determine the question with regard to existence of an arbitration agreement. 17. Hon’ble Supreme Court in their landmark pronouncements in Sukanya Holdings Pvt. Ltd. vs. Jayesh H. Pandya and another, (2003) 5 SCC 531, has clearly ruled that the Arbitration Act does not oust the jurisdiction of the Civil Court to decide the dispute in a case where parties to the arbitration agreement do not take the steps stipulated under Section 8 of the Act. Considering the statutory provisions, the Hon’ble Supreme Court held thus :- “12. For interpretation of Section 8, Section 5 would have no bearing because it only contemplates that in the matter governed by Part-I of the Act, judicial authority shall not intervene except where so provided in the Act. Except Section 8, there is no other provision in the Act that in a pending suit, the dispute is required