Delhi High Court Kohinoor Creations And Ors. vs Syndicate Bank on 26 May, 2005 Equivalent citations: 2005(2)ARBLR324(DELHI), IV(2005)BC156, [2006]132COMPCAS417(DELHI), 121(2005)DLT241, 2005(82)DRJ631 JUDGMENT B.A. Khan, J. 1. Which of the two acts would prevail. Would the provisions of Arbitration and Conciliation Act, 1996 override those of Recovery of Debts due to Banks and Financial Institutions Act, 1993 (RDB Act) is the interesting question raised in this petition. 2. Petitioner No. 1 is the principal borrower and petitioner Nos. 2 to 5 are its guarantors. Petitioner No. 1 executed an export credit agreement with respondent Bank to which other petitioners were not parties. The agreement contained the following arbitration clause: "28. In the event of any dispute or defense whatsoever in any manner relating to this agreement including any dispute or dues as regards the consideration or validity of this document or any part thereof or as to any Act done or committed to be done hereunder or otherwise whosoever the same shall be decided by the sole and summary arbitration by the Chairman of the Bank for the time being or in the event of their being no chairman by the Chief Executive Officer for the time being of the Bank or if he is unable or unwilling to act, then, or any person nominated, or any officer of Bank and it shall be no objection to any such arbitration of the said Chairman or any such person nominated by him that he is/has in any manner connected with the bank or that he has dealt with or taken any decision in the matter of any disputes earlier with regard to which he shall be called upon thereafter to arbitration and his award shall be final and binding on both the parties." 3. Petitioner No. 1 allegedly committed breach of agreement by defaulting in payment of dues and respondent filed a recovery application for recovery of these before the DRT against all the petitioners. While contesting this application petitioners filed an application under Section 8 of the Arbitration and Conciliation Act, 1996 invoking the arbitration clause and sought stay of the proceedings before the DRT sine die and also prayed that their written statement be kept in abeyance. They disputed their liability and alleged that statement of accounts filed by respondent bank was incorrect. They significantly omitted to seek any reference of dispute to arbitrator but their application was labelled under Section 8 of the Arbitration Act nonetheless. 4. The DRT summarily rejected petitioners application by order dated 6.8.2001 on the ground that provisions of Arbitration Act were not applicable to the proceedings before the DRT and declined to stay the proceedings. 5. Petitioners filed an appeal before the Appellate Tribunal against this order and the Tribunal dismissed it by order dated 18.6.2002 on three main planks: 1) That the RDB had taken away the jurisdiction of all Courts except the Supreme Court and the High Court under Articles 226 and 227 of the Constitution and had conferred exclusive jurisdiction on the DRT to adjudicate recovery claims on banks and other financial institutions. 2) That the provisions of Section 34 of the RDB Act would override the provisions of Arbitration Act and supersede any instrument which would include the arbitration agreement between the parties in this case. 3) The arbitration agreement being between the petitioner No. 1 and respondent Bank, the recovery claim against other petitioners would have to be continued and proceeded with before the Tribunal only. 6. The reasoning of the appellate Authority makes an interesting reading. It would, therefore, be advantageous to reproduce the relevant portions from the authority's order for proper appreciation of the issues involved. The authority holds: "A question arises whether the provisions of the Arbitration and Conciliation Act of 1996 will override the provisions of the 'Act' as they override the provisions of the Code of Civil Procedure. I am very clear in my mind that the provisions of the Arbitration And Conciliation Act, 1996 shall not override the provisions of the 'Act'. Rather, I am of the view that the provisions of the 'Act' will override the provisions of the Arbitration and Conciliation Act, 1996. Section 34 of the 'Act' gives an overriding effect to the provisions of the Act. The 'Act' came into force on 24th June, 1993. On the day the 'Act' came into force, in the field of arbitration law, there was a statutory law called the "Arbitration Act, 1940". Therefore, it is obvious that in view of Section 34, the provisions of the 'Act' did override the provisions of the Arbitration Act, 1940 and as such, Section 34 of the Arbitration Act, 1940 which is analogous to the provisions of Section 8 of the new Arbitration Act of the year 1996 became powerless in so far as it related to the pendency of a recovery application by a Bank before a Tribunal e