An arbitration was conducted between Kotak Mahindra Bank Limited and Baun Foundation Trust and others seeking recovery from Baun. After obtaining an award in its favour, Kotak attached Baun’s movables, fittings and fixtures in a residential flat at Malabar Hill of which Baun is the licensee. With reference to the arbitral award obtained by Kotak Mahindra Bank Limited against Baun Foundation Trust, a Chamber summons was filed by Baun in the execution application filed by Kotak Mahindra Bank Limited in the Bombay High Court thereby raising the question of whether an arbitral award obtained by an entity covered under the Recovery of Debts Due to Banks and Financial Institutions Act 1993 (RDDBI), can be executed by the High Court or has to be sent to the Debt Recovery Tribunal for execution.

The counsel appearing for Baun i.e. the Respondents in the execution application, argued that when an award goes unchallenged, or where the challenge fails and there is no doubt that in the present case Baun did not challenge the award — the result is an award that is, under Section 36 of Arbitration and Conciliation Act 1996 (“the Arbitration Act”), put into enforcement as a decree of the Court. A decree, in his submission, is covered by the definition of a debt under the RDDBI Act. Section 18 of the RDDBI Act confers exclusive jurisdiction on the Debts Recovery Tribunal (“DRT”) where debts are sought to be recovered by banks and non-banking financial institution (“NBFCs”). If, therefore, every decree is a debt, and it makes no difference whether the decree arises from a judgment of a court or from an award of a tribunal that is enforceable as a decree, then it is only the DRT that has exclusive jurisdiction to put that arbitral award into execution. In other words, this Court on its Original Side, or, for that matter, any court governed by the Code of Civil Procedure 1908 (“CPC”) and which has original jurisdiction and functions as an executing Court would lose its jurisdiction if the claimant in the arbitration is a body covered by the RDDBI Act. the Counsel for the Respondents further gave reference to the Division Bench judgment of the Bombay High Court in Bank of India v Shree Satya Corporation & Ors & Bhagvatibai B Khetan & Ors while making its submissions.

The Hon’ble Justice G.S Patel, while presiding upon the said execution application and the chamber summons sought the appointment of Mr Zal Andhyarujina, or if he is unable for any reason to accept the assignment, Mr Sharan Jagtiani to assist the Court as amicus in addressing this question placed before it and also framed the following issues:

(a) Whether an arbitral award in the hands of an entity covered by the RDDBI Act must be sent to the Debt Recovery Tribunal for enforcement and execution?

(b) Whether this Court has no jurisdiction to entertain any execution application in respect of an arbitral award obtained by an entity covered by the RDDBI Act?

(c) The scope of the Division Bench decision in Bank of India v Shree Satya Corporation & Ors & Bhagvatibai B Khetan & Ors.

(d) If the answer to questions (a) or (b) (or both) is in the affirmative, what is the effect on past orders in execution of such awards, and on pending execution applications where orders have been passed?

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Order: Kotak Mahindra Bank Limited Versus Baun Foundation Trust and Anr