Disputes between lenders and borrowers are non-arbitrable under the SARFAESI Act, which necessitates adherence to statutory remedies, exclusively available through the Debt Recovery Tribunal.

JUDGMENT

Anup Jairam Bhambhani J.

By way of the present petition under section 11 of the Arbitration & Conciliation Act, 1996 ('A&C Act' for short), the petitioners seek appointment of an arbitrator to adjudicate upon the disputes that are stated to have arisen with the respondent from Rupee Facility Agreement dated 26.04.2019 ('Rupee Facility Agreement').

2. Notice on this petition was issued on 07.04.2021; whereupon counter-affidavit dated 05.07.2021 was filed by the respondent.

3. Mr. Sanjeev Bhandari, learned counsel for the petitioner has premised his submissions on section 11 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ('SARFAESI Act' for short), which, counsel submits, creates a statutory arbitration agreement between the parties. For completeness, it may be recorded that the Rupee Facility Agreement in itself does not contain an arbitration clause.

4. The essential submissions made on behalf of the petitioners in support of their petition under section 11 of the A&C Act are the following:

4.1. That petitioner No. 1 is a Non-Banking Finance Company ('NBFC' for short) registered with the Reserve Bank of India, and is accordingly a `financial institution' within the meaning of section 2(1)(m)(iv) of the SARFAESI Act, which entitles the petitioners to invoke arbitration under section 11 of the SARFAESI Act, since the latter provision amounts to a statutory arbitration agreement for settlement of disputes "amongst ... the bank, or financial institution, or asset reconstruction company or qualified buyer ... ". The submission is that since the dispute in the present case is between petitioner No. 1, an NBFC, and the respondent, which is a bank, and they are both entities referred to in section 11 of the SARFAESI Act, their inter-se disputes are amenable to arbitration under section 11;

4.2. That the proceedings filed by the respondent before the learned Debt Recovery Tribunal, Jaipur ('DRT, Jaipur' for short) by way of O.A. No. 1442/2019, which were filed after declaring petitioner No. 1's assets/accounts as a non-performing asset ('NPA' for short) on 18.12.2019, and all other consequential and related proceedings, including the issuance of show cause notice for declaring petitioner No. 1 as `wilful defaulter', cannot stand in the way of the petitioners invoking the remedy in arbitration. It is stated that vide invocation notice dated 08.02.2021, the petitioners have invoked arbitration; and since by its reply dated 15.02.2021 the respondent has failed to agree to the appointment of a sole arbitrator from a panel of three arbitrators proposed by the petitioners in the invocation notice, the present petition seeking court intervention for seeking such appointment is maintainable.

5. On the other hand, opposing the appointment of an arbitrator, Mr. Shivam Singh, learned counsel for the respondent submits, that the petition deserves to be dismissed on the following grounds:

5.1. That the respondent's claim against the petitioners is simply for recovery of a debt due by petitioner No. 1 to the respondent; and the dispute is a simple debtor-creditor dispute, with petitioner No. 1 being a "borrower" within the meaning of section 2(1)(f) of the SARFAESI Act. It is submitted that even though petitioner No. 1 is a "financial institution" as defined under section 2(1)(m) of the SARFAESI Act, it also comes within the ambit of a "borrower" since the respondent has extended financial assistance to petitioner No. 1;

5.2. That the respondent has invoked proceedings under section 13 of the SAR