The Supreme Court has ruled that arbitration is mandatory for inter-bank disputes under the SARFAESI Act, as per the judgment in Bank of India v. Nangli Rice Mills. This landmark decision clarifies that:
– Arbitration is Compulsory: No discretion for parties to opt out.
– No Written Agreement Required: Arbitration can proceed without a written agreement between parties, as per Section 11 of the SARFAESI Act.
Implications:
– Efficient Dispute Resolution: Arbitration provides a faster and more efficient way to resolve inter-bank disputes.
– Reduced Litigation: Mandatory arbitration can reduce the judicial burden.
Impact on Banking Sector:
– Clarity and Consistency: This ruling provides much-needed clarity on dispute resolution mechanisms.
– Streamlined Processes: Banks can now rely on arbitration to resolve disputes efficiently.
