Successor Bank Can't Invoke Arbitration After Suit Reaches Defence Evidence Stage: Gujarat High Court

The Gujarat High Court, on 4 November, held that a successor bank cannot claim a fresh opportunity to invoke arbitration when its predecessor had failed to seek reference within the prescribed time.

A Bench of Justice Maulik J. Shelat dismissed HDFC Bank Ltd.'s petition challenging the rejection of its application under Section 8 of the Arbitration and Conciliation Act, 1996, holding that the bank had inherited its predecessor's position in the proceedings and could not exercise a right that the predecessor had failed to invoke. It said:

“Once the petitioner's predecessor did not file the necessary application under Section 8 of Act, 1996 in time, and matter reached the stage of oral evidence of the petitioner (defendant), such type of application by the successor in interest of the defendant cannot be entertained”

The dispute arose from a civil suit filed in 2001 by Agiben and others against Centurion Bank of Punjab. Although their agreement contained an arbitration clause, Centurion contested the suit by filing a written defence without seeking reference of the dispute to arbitration.

The trial court framed issues for determination on 7 January 2014. Subsequently, Centurion merged with HDFC Bank, following which Agiben and others filed an application under Order VI Rule 17 of the Code of Civil Procedure to implead HDFC in the proceedings.

By the time HDFC sought reference to arbitration, Agiben and others had completed presenting their evidence, and the trial court was ready to record the bank's evidence.

On 26 July 2019, the Senior Civil Judge, Vadodara, rejected HDFC's application under Section 8 of the Arbitration and Conciliation Act, 1996.

HDFC challenged the decision before the High Court under Article 227 of the Constitution. It argued that it had sought arbitration before filing its own written defence and that the summons issued after its impleadment entitled it to file an independent defence and invoke the arbitration clause.

Agiben and others opposed the petition, arguing that HDFC had merely stepped into Centurion's position following the merger and could not claim rights that its predecessor had failed to exercise. They also contended that the proceedings had advanced too far to permit a reference to arbitration.

The High Court rejected HDFC's contention that its impleadment gave it a fresh opportunity to invoke arbitration. It observed that HDFC had entered the proceedings because Centurion's rights and liabilities had devolved upon it through the merger. Its impleadment through an amendment to the plaint did not alter its position as the successor to the original defendant.

It further noted that HDFC had no direct contractual relationship with Agiben and others. Centurion, despite being aware of the arbitration clause, had chosen to contest the suit by filing its written defence without invoking Section 8 of the Act.

Further, the Bench held that HDFC had inherited Centurion's position in the litigation and could not claim a better right to defend the proceedings than its predecessor. It stated:

“According to me, the petitioner-Bank is only step into shoe of original defendant-Bank and cannot have a better right to defend the suit proceeding than available to its predecessor, i.e., Centurion Bank of Punjab – original defendant”

Dismissing HDFC's petition on 4 November 2026, the Justice Shelat vacated the interim relief and refused to extend it to enable the bank to approach a higher forum. It directed that the suit be decided as expeditiously as possible.

However, the Bench permitted HDFC to seek the trial court's permission to file an additional written defence or amend Centurion's existing written defence. It clarified that the trial court would decide the request after giving Agiben and others an opportunity to oppose it, while considering the time already spent before the High Court.

Accordingly, the High Court dismissed the petition without imposing costs.

Appearances for petitioner (HDFC Bank Ltd.): Advocates D.P. Kinariwala, Nikunj D. Balar.

Appearances for respondent (Agiben and others): Advocate Yogin A. Bhambhani.