Calcutta High Court Says IDFC First Bank Lost Right To Seek Arbitration After Waiting 11 Months In Loan Suit

The Calcutta High Court has dismissed IDFC First Bank Limited's appeal against a trial court order that refused to send a loan dispute to arbitration and struck off the bank's defence for failing to act within time.

A division bench of Justice Debangsu Basak and Justice Md. Shabbar Rashidi upheld the order, finding that the bank had waited nearly 11 months after entering appearance in the suit before seeking arbitration.

“In the case at hand, as noted above, the appellant/defendant came up with an application under Section 8 of the Arbitration and Conciliation Act, 1996 after about 11 months of its first appearance in the suit which came to be rejected by the learned Trial Court on the ground that the same was filed much after the expiry of the time prescribed for putting in the statement of defence,” the bench observed.

“Therefore, in view of the discussions made hereinabove, we find no reason to interfere with the impugned order. The same is hereby affirmed. Accordingly, the instant appeal being FMA 1389 of 2025 is hereby dismissed,” it added.

The dispute arose from a business loan of ₹20.4 lakh granted by a pre-merger entity of IDFC First Bank to Shyamsundar Distributor and its partner Anupam Pal under a loan agreement containing an arbitration clause.

According to the borrowers, they paid ₹12.84 lakh in January 2019 towards what they said was full and final settlement of the loan following their request for premature foreclosure. The bank, however, later claimed ₹14.38 lakh as foreclosure dues, following which the borrowers filed a civil suit seeking declaration and permanent injunction.

The bank first appeared in the suit on April 10, 2024, but moved its arbitration plea only on March 6, 2025, after seeking multiple extensions to file its written statement.

Before the High Court, the bank argued that since the trial court had extended the time to file its written statement, the time to seek arbitration should also stand extended. It also argued that because the suit had been taken off the ex parte board, it had not waived its right to contest the proceedings.

The borrowers argued that the bank's prolonged delay after entering appearance amounted to waiver of its right to seek arbitration.

Agreeing with the trial court, the High Court held that while timelines for filing written statements may be relaxed in exceptional cases, parties cannot remain inactive for prolonged periods without justification and later seek arbitration.

Finding no circumstance that prevented the bank from acting earlier, the court dismissed the appeal.

For Appellants (IDFC First Bank Limited and Another): Advocates Ranjit Singh, Shounak Mukhopadhyay, Amar Singh, Tutul Das, S. Mukherjee.

For Respondents (Shyamsundar Distributor and Another): Advocates Ejaz Khan, Pradip Kumar De, Debnath Mahata.