The Delhi High Court has asked the Delhi Police to clarify if it is commonplace for it to accompany bank receivers for enforcing orders passed by arbitrators against loan borrower, without approaching an executing court (Tarun Krishnan Aggarwal vs SHO PS Hauz Qazi).
“If so, how many such actions have been taken in the last two months,” a single-judge Bench of Justice Prathiba Singh asked.
The Court also put the same query to Kotak Mahindra Bank and directed it to state if its receivers take police help straightaway by visiting the residences/premises of borrowers along with the officers, without approaching the executing court.
The Court was dealing with a petition wherein the petitioners had availed of a loan facility with Kotak Mahindra Bank. However, in view of outstanding payment, arbitration was initiated by the Bank.
The arbitrator purportedly passed an order appointing an officer of the bank as receiver to take possession and custody of the movable properties of the petitioners.
The petitioners alleged that this officer, along with the Delhi Police, reached their residence one day and forcibly entered the premises.
It was inter alia claimed that the petitioners were forced to make an NEFT transfer of Rs 59,205 to the Bank and give the Bank a cheque of Rs 1,18,410. Further, the petitioners alleged that they were threatened and continued to be harassed.
After perusing the record, the Court opined that the way the order under Section 17 of the Arbitration & Conciliation Act, 1996 was sought to be enforced through the police and the receiver was contrary to law.
“..any order passed under Section 17 can only be enforced in accordance with law. Thus, the party in whose favour an order under Section 17 is passed ought to approach the executing court in the concerned area for appropriate orders. The way the ld. Arbitrator has directed appointment of a receiver and passed an order permitting the bank to take police aid is prima facie not tenable,” the Court said.
The Court stated that the authority allegedly exercised by the police for enforcement of the order passed by the arbitrator was clearly questionable.
It thus directed the ACP of the concerned area to file a status report on the facts pleaded in the present case. The Bank was asked to “confirm the contents of the petition”.
Considering the nature of the matter, the Court stayed the proceedings before the Arbitrator subject to the petitioners depositing a sum Rs 5,00,000.