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I.D.F.C. First Bank Ltd. v. Dr. Aruna Bamniya And Others
Factual and Procedural Background
This revision petition under Section 151 CPC was filed by defendant No. 5 (petitioner) against the impugned order dated 16.03.2021 passed by Commercial Court No. 2, Jaipur Metropolitan-II, Jaipur in Suit No. 53/2020 (430/2019), which dismissed an application presented under Order VII, Rule 11 read with Section 151 CPC and Sections 8 & 5 of the Arbitration and Conciliation Act, 1996 (A&C Act).
The plaintiff applied for loans from multiple banks including the petitioner; seven banks together credited a consolidated amount of Rs. 98,34,413/-. The plaintiff alleged fraud by certain doctors and other persons, claiming that signatures were obtained on blank papers and that amounts credited to her account were transferred to Kishan Hospital and Research Centre. The plaintiff lodged FIR No. 274/2019 under Sections 420 and 406 IPC and became aware of FIR No. 17/2019 against various persons; she notified banks to refrain from proceedings, but banks issued notices and initiated arbitration and recovery proceedings. The plaintiff sought a declaration that the loan agreements were void and an injunction restraining arbitration and recovery proceedings.
Defendant No. 5 (petitioner) filed an application under Order VII, Rule 11 CPC read with Sections 8 and 5 of the A&C Act, asserting that a personal loan of Rs. 10,42,000/- had been taken from it under a loan agreement dated 16.02.2019 containing Arbitration Clause No. 23; that the dispute fell under the A&C Act and was therefore beyond the jurisdiction of the Commercial Court; and that the plaint should be rejected as barred by law, among other contentions. The Commercial Court dismissed that application, and the petitioner filed the present revision petition challenging the dismissal.
Legal Issues Presented
- Whether the impugned order should be categorized as an order under Section 37(1)(a) of the A&C Act (i.e., an order appealable under Section 37) or as an order under Order VII, Rule 11 CPC.
- Whether allowing the application under Order VII, Rule 11 CPC filed by one defendant (petitioner) would finally terminate the suit (thus engaging revisional jurisdiction of the High Court).
Arguments of the Parties
Petitioner's Arguments (Defendant No. 5)
- The plaint should be rejected as the dispute falls within an arbitration clause (Clause No. 23) in the loan agreement dated 16.02.2019 and therefore the Commercial Court lacks jurisdiction.
- The dispute is governed by the A&C Act and the Civil Court should not entertain the suit; the suit is barred by law and no cause of action arises for the plaintiff against this defendant.
- The petitioner had not prayed specifically under Section 8 A&C Act to refer the dispute to arbitration because, as per the arbitration clause, the Bank had the right to appoint the arbitrator and had in fact already appointed a sole arbitrator who passed an award dated 28.02.2020 (note: record also refers to an award passed on 28.09.2020 in the file).
- The impugned order is not an interlocutory order and therefore revisional jurisdiction of the High Court could be invoked.
- Relying on Section 5 of the A&C Act, the petitioner contended that the provisions of the A&C Act prevail over general statutes and judicial intervention is limited.
Plaintiff/Respondent No. 1's Arguments
- Under Section 13 of the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015, any person aggrieved by the decision of a Commercial Court may appeal to the Commercial Appellate Division of the High Court.
- Under Section 37 of the A&C Act, an appeal lies to the court authorized to hear appeals from original decrees of the court passing the order; thus the impugned order is appealable under Section 37(1)(a) and a revision petition is not maintainable.
Respondent No. 3's Arguments
- The impugned order is not an interlocutory order, and Section 8 of the Commercial Courts Act is not attracted; furthermore, an award has already been passed by the sole arbitrator resolving the controversy.
Respondent No. 6's Arguments
- The revision petition is not maintainable; alternatively, a writ petition under Article 226 of the Constitution of India is maintainable against the impugned order (several authorities were cited in support of this contention).
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Caravel Shipping Services Pvt. Ltd. v. Premier Sea Foods Exim Pvt. Ltd. : (2019) 1 WLC (SC) Civil 183 | Relied upon by learned counsel for the petitioner in support of the contention regarding arbitration and court jurisdiction. | The Court recorded that this and other judgments were relied upon by the petitioner, but the opinion does not expressly apply or analyze this precedent in its reasoning. |
| Johra Bi v. Jageshwar : (2010) 1 MP LJ 98 | Relied upon by learned counsel for the petitioner in support of his contentions regarding arbitration and jurisdiction. | The Court noted the citation as relied upon by the petitioner; the Court's reasoning does not expressly invoke this authority. |
| Rashid Raza v. Sadaf Akhtar : (2019) 8 SCC 710 | Relied upon by learned counsel for the petitioner in support of his contentions regarding arbitration and jurisdiction. | The Court recorded reliance but did not expressly base its decision on this precedent in the written analysis. |
| Sundaram Finance Limited v. T. Thankam : (2015) 14 SCC 444 | Relied upon by learned counsel for the petitioner in support of his contentions regarding arbitration and jurisdiction. | The Court noted this citation among those relied upon by the petitioner; the opinion does not explicitly apply it in the analysis. |
| Swiss Timing Limited v. Commonwealth Games 2010 Organising Committee : (2014) 6 SCC 677 | Relied upon by learned counsel for the petitioner in support of his contentions regarding arbitration and jurisdiction. | The Court mentioned this citation but did not expressly rely upon it in the reasoning contained in the opinion. |
| Shri Ram Tansport Finance Co. Ltd. v. Jasveer Singh : (2000) 1 Arb LR 192 | Relied upon by learned counsel for the petitioner in support of his contentions regarding arbitration and jurisdiction. | The Court recorded the citation; the opinion does not demonstrate express application of this precedent. |
| Balaji Industrial Products Limited v. Aia Engineering Limited : D.B. Civil Writ Petition No. 16794/2017 | Relied upon by learned counsel for respondent No. 6 to support the contention that a writ petition may be maintainable. | The Court noted the authority cited by respondent No. 6 but did not decide on the maintainability of a writ petition; the judgment was not expressly applied to dispose of the revision petition. |
| Raj. State Mines & Minerals Ltd. v. Ankur Mining Product Pvt. Ltd. : S.B. Civil Writ No. 920/2019 | Relied upon by learned counsel for respondent No. 6 in support of the contention regarding writ jurisdiction. | The Court recorded the citation; the opinion did not engage in a detailed application of this precedent. |
| Balaji Industrial Product Ltd. v. AIA Engineering Ltd. : 2018 SCC OnLine Raj 2315 | Relied upon by learned counsel for respondent No. 6 in support of the contention that writ remedy may be available. | The Court noted the citation but did not decide the writ-point; it expressly refrained from making observations on the right to file a writ petition against the impugned order. |
| N.N. Global Mercantile Pvt. Ltd. v. Indo Unique Flame Ltd. : (2021) 4 SCC 379 | Relied upon by learned counsel for respondent No. 6 in support of the contention regarding availability of writ jurisdiction. | The Court recorded the citation; the opinion does not show express reliance upon this authority in reaching its decision to dismiss the revision petition as not maintainable. |
Court's Reasoning and Analysis
The Court framed the primary questions as whether the impugned order is appealable under Section 37(1)(a) of the A&C Act or is an order under Order VII, Rule 11 CPC, and whether allowing the petitioner's application would finally terminate the suit.
The Court noted the legal principle that the High Court's revisional jurisdiction can be invoked only when allowing the impugned application would finally terminate the proceedings (para 16). The Court examined the record and observed that petitioner had not specifically prayed under Section 8 of the A&C Act for a reference to arbitration; rather, the petitioner had contended only that the Commercial Court lacked jurisdiction because of an arbitration clause. Importantly, the petitioner had already appointed a sole arbitrator and an award had been passed (the opinion records appointment and an award dated first 28.02.2020 and elsewhere 28.09.2020).
Given these facts, the Court held that the petitioner's application under Order VII, Rule 11 CPC and Sections 8 & 5 of the A&C Act could not be categorized as an application under Section 8 to refer the matter to arbitration (para 18). Consequently, the impugned order was not appealable under Section 37(1)(a) of the A&C Act.
The Court characterized the petitioner's application as being made under Order VII, Rule 11(d) CPC on the ground that the suit was barred by law. While recognizing that an Order VII, Rule 11(d) dismissal can in many cases finally terminate proceedings, the Court analyzed the peculiar facts: the plaint was filed against seven separate banks, each with separate loan agreements and disputes concerning recovery. The Court concluded that allowing an application by one defendant (the petitioner) would not finally dispose of the suit because proceedings against the other six banks would continue (paras 19, 21, 22).
The Court also referred to the proviso to Section 115 CPC (added by the 1999 Amendment Act effective 2002) which restricts the High Court from varying or reversing interlocutory orders unless the order, if made in favor of the applicant, would have finally disposed of the suit (para 21). Applying that provision, the Court found that even if the petitioner's application had been allowed, the suit would not have been finally disposed of due to the presence of other defendants.
The Court noted the legal position that where an arbitration clause exists, the Civil Court is generally under an obligation to refer the matter to arbitration rather than rejecting a plaint; however, in the present case the petitioner had itself initiated arbitration proceedings and an award had been obtained (para 23).
For these reasons, the Court concluded that the impugned order was an interlocutory order passed by the Commercial Court and, per the provisions of Section 8 of the Commercial Courts Act, there is a bar on the Court to entertain any civil revision against such interlocutory orders (para 24). The Court therefore held the present revision petition not maintainable and declined to make any observations on the alternative contention regarding the availability of writ jurisdiction.
Holding and Implications
Holding: The revision petition is dismissed as not maintainable.
Implications:
- The immediate and direct effect is that the petitioner's challenge to the Commercial Court's dismissal of its Order VII, Rule 11 application (as per the impugned order dated 16.03.2021) fails; the revision remedy in the High Court under Section 151 CPC is not available in this matter.
- The Court concluded that the impugned order is interlocutory and not appealable under Section 37(1)(a) of the Arbitration and Conciliation Act; the petitioner's approach was characterized as an Order VII, Rule 11(d) application and, given multiple defendants and separate loan agreements, allowing one defendant's Rule 11 application would not finally dispose of the suit.
- The Court expressly refrained from adjudicating on the contention that a writ petition under Article 226 is maintainable; therefore no determination was made on that alternative remedy.
- The opinion does not purport to lay down a new legal precedent beyond the application of the described principles to the facts of this case; its effect is confined to the parties and their procedural positions in this litigation.
Rameshwar Vyas, J.:— The instant revision petition under Section 151 CPC has been filed against the impugned order dated 16.03.2021 passed by Commercial Court No. 2, Jaipur Metropolitan-II, Jaipur (afterwards referred to as ‘Commercial Court’) in Suit No. 53/2020 (430/2019), whereby, the application under Order VII, Rule 11 read with Section 151 CPC and Sections 8 & 5 of the Arbitration and Conciliation Act, 1996 (afterwards referred to as the ‘A&C Act’) filed by defendant No. 5 - petitioner herein has been dismissed.
2. Brief facts of the case are that the plaintiff-respondent No. 1 herein applied for loan to so many Banks including petitioner Bank; the consolidated amount taken on loan from different seven Banks is Rs. 98,34,413/-; plaintiff filed a suit against all the banks including the present petitioner - defendant No. 5 to the effect that a fraud has been committed by some doctors viz. Dr. Manohar Lal, Dr. Vikash Sharma and other persons; defendants managed to get sign of the plaintiff on blank papers and forms; a total sum of Rs. 98,32,101/- was credited by defendant Banks in the account of plaintiff; afterwards plaintiff came to know that the said credited money has been transferred in the account of Kishan Hospital and Research Centre; thereafter plaintiff lodged an FIR No. 274/2019 under Sections 420 and 406 IPC on 02.07.2019 against all the defendants; thereafter plaintiff came to know from the newspaper that an FIR No. 17/2019 under Sections 420, 406, 467, 468, 471 and 120B IPC has been registered against Dr. Ram Lakhan Desaniya, Dr. Nand Lal Desaniya, Dr. Suresh Rolaniya, Dr. Manohar Kanwariya, Dr. Pavan Sharma, Dr. Ravi Prakash Khatri, Dr. Neha Jain, Vikas Sharma, Radha Mohan, Karan and Laxmi Narayan, in which, after filing charge-sheet cognizance has been taken by the Court; from the FIR No. 17/2019 plaintiff came to know that fraud has been committed with her by the defendants then plaintiff intimated the Banks that no proceedings should be initiated against the plaintiff on the forged document; all the banks sent notices to the plaintiff and initiated arbitration proceedings; since all the loan accounts were opened in a fraudulent manner, hence the arbitration proceedings cannot be initiated; the plaintiff prayed that all the loan agreements may be declared void and defendants may be restrained from initiating any arbitration and recovery proceedings against the plaintiff on the basis of above forged loan agreements.
3. An application under Order VII, Rule 11 CPC read with Sections 8 and 5 of the A&C Act was filed by defendant No. 5-petitioner herein, to the effect that plaintiff borrowed a sum of Rs. 10,42,000/- as personal loan from it, for which, a loan agreement was entered between them on 16.02.2019, which contained the arbitration clause No. 23; since the dispute between the parties could have been decided under the provisions of the A&C Act, the Commercial Court has no jurisdiction to decide the same; it is further averred that the suit is barred by law; if plaintiff has any grievance then she has right to seek reference of the dispute to the Arbitrator; it is also averred in the application that the plaintiff did not file sufficient court fees also; as per the averments of defendant No. 5-petitioner herein no cause of action arises in favour of the plaintiff and the suit is barred by law, hence the same was liable to be dismissed.
4. The above application was dismissed by the impugned order. Hence, this revision petition has been filed by defendant No. 5-petitioner herein.
5. Learned counsel for the petitioner submitted that the plaintiff filed a suit against seven Banks containing therein that the loan amount credited in plaintiff's account was transferred to Kishan Hospital and Research Centre. It is submitted that the petitioner in its application has only sought relief for rejection of plaint being barred by law. The petitioner has not made any prayer in terms of Section 8 of the A&C Act to refer the dispute to the Arbitrator for the reason that as per arbitration clause the Bank has right to appoint the Arbitrator, which they already did and the Arbitrator has passed the award dated 28.02.2020 determining the liability of the plaintiff-respondent No. 1 herein. It is submitted that if the application filed by the petitioner would have been allowed then the proceedings of the Civil Court would have been terminated on the ground that the suit is barred by law as there is arbitration clause between the parties.
6. It is submitted that as the impugned order is not an interlocutory order, thus the revisional jurisdiction of the High Court can be invoked. The provisions of A&C Act are special provisions, which prevails over the general statute. As per the provisions of Section 5 of the A&C Act 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.
7. It is further submitted that the above provisions show that if there is an arbitration clause in loan agreement then judicial authority shall not intervene and the jurisdiction of the Civil Court is curtailed by operation of Section 5 of the A&C Act. As per the provisions of Section 8 of the A&C Act a judicial authority is under an obligation to refer the parties to arbitration.
8. It is further submitted by learned counsel for the petitioner that the impugned order passed under Order VII, Rule 11 CPC is not an interlocutory order and, therefore, the provisions contained in Section 8 of the A&C Act are not attracted.
9. Learned counsel for the petitioner relied upon the following judgments in support of his contentions:—
(1) Caravel Shipping Services Pvt. Ltd. v. Premier Sea Foods Exim Pvt. Ltd. : (2019) 1 WLC (SC) Civil 183.
(2) Johra Bi v. Jageshwar : (2010) 1 MP LJ 98.
(3) Rashid Raza v. Sadaf Akhtar : (2019) 8 SCC 710.
(4) Sundaram Finance Limited v. T. Thankam : (2015) 14 SCC 444.
(5) Swiss Timing Limited v. Commonwealth Games 2010 Organising Committee . 2010 Organising Committee : (2014) 6 SCC 677.
(6) Shri Ram Tansport Finance Co. Ltd. v. Jasveer Singh : (2000) 1 Arb LR 192.
10. On the other hand, learned counsel for respondent No. 1-plaintiff contended that as per provisions of Section 13 of the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015 (afterwards referred to as the Commercial Courts Act’) any person aggrieved by decision of Commercial Court may appeal to the Commercial Appellate Division of that High Court.
11. Learned counsel while drawing attention of the Court towards provisions of Section 37 of the A&C Act submitted that against the impugned order an appeal will lie to the Court authorized by law to hear the appeals from original decrees of the Court passing the order.
12. Since the impugned order was appealable under Section 37(1)(a) of the A&C ACt, no revision petition is maintainable against the said order.
13. Learned counsel for respondent No. 3 submitted that the impugned order is not an interlocutory order hence the provisions of Section 8 of the Commercial Courts Act are not attracted. It is further submitted that the award has already been passed by the sole arbitrator deciding the controversy between the parties.
14. Learned counsel for respondent No. 6 submitted that the revision petition is not maintainable. On the other hand, as per his contention a writ petition under Article 226 of the Constitution of India is maintainable, for which, he relied upon the following judgments:—
(1) Balaji Industrial Products Limited v. Aia Engineering Limited : D.B. Civil Writ Petition No. 16794/2017.
(2) Raj. State Mines & Minerals Ltd. v. Ankur Mining Product Pvt. Ltd. : S.B. Civil Writ No. 920/2019.
(3) Balaji Industrial Product Ltd. v. AIA Engineering Ltd. : 2018 SCC OnLine Raj 2315.
(4) N.N. Global Mercantile Pvt. Ltd. v. Indo Unique Flame Ltd. : (2021) 4 SCC 379.
15. The question which arises for consideration before this Court is whether the impugned order may be categorized an order passed under Section 37(1)(a) of the A&C Act or it is an order passed under Order VII, Rule 11 CPC. It has also to be looked into whether allowing the application under Order VII, Rule 11 CPC will terminate the proceedings of suit.
16. The revisional jurisdiction of the High Court can only be invoked when the effect of allowing the application will be that it will finally terminate the proceeding.
17. After carefully gone through the record it clearly reveals that the petitioner has not made any prayer to refer the dispute before the Arbitrator. On the other hand, it was contended that the Commercial Court has no jurisdiction to decide the controversy since there is an arbitration clause in the loan agreement entered in between the parties. It is not in dispute that an arbitration Clause No. 23 is there in the loan agreement entered in between the parties. It is pertinent to note that the petitioner has already appointed sole arbitrator in this matter and award has already been passed by the Arbitrator on 28.09.2020.
18. In these circumstances the application filed by the petitioner under Order VII, Rule 11 CPC and Sections 8 & 5 of the A&C Act cannot be categorized as an application to refer the matter to arbitration under Section 8 of the A&C Act. Hence, the impugned order is not an appealable order under the provisions of Section 37(1)(a) of the A&C Act. In the considered opinion of this Court the application filed by the petitioner is certainly an application filed under Order VII, Rule 11(d) CPC on the ground that the suit is barred by law.
19. It is true that generally decision on the application under Order VII, Rule 11(d) CPC may terminate the proceedings, but looking to the peculiar facts of the present case, allowing the application of one of the defendants filed under Order VII, Rule 11 CPC will not terminate the suit filed by the plaintiff against all the seven defendant - Banks.
20. As stated earlier, in the present case, the loan agreements have been entered in between the plaintiff and defendant-Banks separately and there is dispute regarding recovery of the loan account. As per contention of the plaintiff, she has been cheated by Banks with the help of some other persons, whereas, as per contention of the Banks including the petitioner the plaintiff has taken personal loan from the different Banks to the tune of Rs. 98,34,413/- and she has not repaid the same. There is arbitration clause in the agreement entered in between the parties.
21. As per the proviso to Section 115 CPC added by the Amendment Act, 1999 w.e.f. 2002 the High Court shall not, under this section, vary or reverse any order made, or any order deciding an issue, in the course of a suit or other proceeding, except where the order, if it had been made in favour of the party applying for revision, would have finally disposed of the suit or other proceedings.
22. As stated earlier, in the facts and circumstances of the case, if application filed by the petitioner had been decided in the petitioner's favour would not finally dispose of the suit since there are other defendants also against whom plaintiff has sought the protection from initiating arbitration and recovery proceedings.
23. It is also relevant to mention here about the legal position that in cases where there is an arbitration clause in the agreement then Civil Court instead of rejecting the plaint is under an obligation to refer the matter to the Arbitrator, whereas, in the present case petitioner itself embarked upon the proceeding under A&C Act and got award in its favour by Arbitrator.
24. In the considered opinion of this Court, the impugned order is certainly an interlocutory order passed by the Commercial Court, against which, as per the provisions of Section 8 of the Commercial Courts Act there is bar on the Court to entertain any civil revision. Hence, the present revision petition is not maintainable. Regarding the contention of learned counsel for respondent No. 6 that writ petition lies against the impugned order, suffice it to say that there is need to observe anything regarding the right of the petitioner to file writ petition against the impugned order.
25. Consequently, the present revision petition is dismissed as not maintainable.
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