2018 (8) TMI 2107 - HC - Indian Laws

Seeking appointment of an arbitrator - Arbitration in the Credit Information Companies (Regulation) Act, 2005 - credit institution - applicant pleaded that the third respondent CIC has erroneously and without verification of any details, included false information as furnished by the credit institution, regarding the applicant - whether the dispute as between the applicant as a borrower and the credit institution is not a dispute that would fall under Section 18 of the Act for settlement in terms thereof read with the provisions of the A C Act? HELD THAT - Section 18 of the Act is a mechanism for settlement of disputes relating to business of credit information. It does not relate to settlement of any dispute as between the borrower and the credit institution in relation to the credit information given by the credit institution to the CIC, including the correctness or otherwise of such information. This will be the legal position also in relation to any dispute as between a 'client' as defined in Section 2(c) (which is an inclusive definition) of the Act and the credit institution. Section 18 of the Act would apply only when dispute arises on matters relating to business of credit information. A dispute between the borrower and credit institution, including any dispute as to the correctness or otherwise of the credit information given by the credit institution to the CIC, is not a dispute relating to the business of credit information. This request filed invoking Section 11(6) of the Arbitration and Conciliation Act, 1996 read with Section 18 of the Credit Information Companies (Regulation) Act, 2005 fails - Application dismissed.

Summary

Issues:
Interpretation of arbitration provision in the Credit Information Companies (Regulation) Act, 2005.

Analysis:
1. The case involved the consideration of the arbitration provision in the Credit Information Companies (Regulation) Act, 2005. The applicant, a credit card user, alleged that a credit information company (CIC) included false information provided by a credit institution without verification, leading to a dispute. The applicant sought arbitration under Section 18 of the Act read with Section 11(6) of the Arbitration and Conciliation Act, 1996.

2. The Reserve Bank of India (RBI) and the CIC contested that the dispute did not fall under the purview of arbitration as per the Act. The RBI clarified that no arbitrator could be appointed for the matters raised by the applicant. The CIC denied the allegations and argued that disputes between the borrower and credit institution did not align with the Act's settlement provisions.

3. The applicant's counsel cited a judgment from the High Court of Calcutta in support of arbitration eligibility, while the respondent's counsel referred to a judgment from the High Court of Bombay to oppose arbitration for disputes not directly related to the CIC's business. The Act aimed to regulate CICs and facilitate credit distribution efficiently.

4. The Act defined the functions of a CIC, emphasizing the collection and processing of credit information from credit institutions to provide to specified users. The Act mandated CICs to engage only in business activities related to credit information as specified in Section 14.

5. The court analyzed Section 18 of the Act, which outlined the settlement of disputes related to the business of credit information through conciliation or arbitration. It clarified that disputes between borrowers and credit institutions regarding credit information did not fall under this provision unless directly linked to the CIC's business activities.

6. Based on the interpretation of the Act's provisions, the court followed the decision of the Bombay High Court, stating that the Calcutta High Court's judgment was not applicable to the current legal issues. Consequently, the arbitration application invoking Section 11(6) of the Arbitration and Conciliation Act, 1996, along with Section 18 of the Credit Information Companies (Regulation) Act, 2005, was dismissed.