Debt Recovery Appellate Tribunal - Delhi
Prestolite Of India Ltd. And Ors. vs Union Bank Of India on 15 September, 2005
Equivalent citations: I(2006)BC68, [2006]130COMPCAS117(NULL)
ORDER
Motilal B. Naik, J. (Chairman)
1. An interesting question of law is raised in this appeal on behalf of the appellants on the competence of a Presiding Officer to permit a Recovery Officer to decide the objections raised at the time of issuance of a recovery certificate.
2. I have heard the learned Counsel for the appellant as well as the learned Counsel for the respondent Bank.
3. From the narration of facts, it would appear that initially a suit in OS No. 350 of 1981 was filed in the Court of the Additional Sub-Judge, Faridabad. A compromise decree has been passed on 15.11.1991. However, the defendants seem to have initiated execution proceedings before the said Civil Court against the respondent-Bank alleging that the respondent-Bank has violated certain terms of the consent decree made on 15.11.1991. The said execution proceedings seems to be still pending before the Civil Court.
4. After the enactment of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, the suit pending before the Civil Court stood transferred to respective Debts Recovery Tribunal if the value of suit is more than Rs. 10.00 lakhs. Later, on 17.1.2000, an amendment was introduced by insertion of Clause A to Section 31 which provided where a decree or an order passed by any Court before the commencement of the Recovery of Debts Due to Banks and Financial Institutions Act (Amendment) Act, 2000 has not been executed, then the decree holder may apply to the Debts Recovery Tribunal (DRT) to pass an order for recovery of the amount. On receipt of an application under Sub-section (1), the DRT may issue a certificate for recovery to the Recovery Officer. On receipt of a certificate under Sub-section (2), the Recovery Officer shall proceed to recover the amounts as if it was a certificate in respect of debt recoverable under the Act.
4. On the basis of this amendment which was introduced on 17.1.2000, the decree holder, the respondent-Bank herein, made an application before the DRT, Chandigarh seeking issuance of a recovery certificate. At that stage, it would appear, the appellants herein who are the JDs/defendants raised several objections before the Presiding Officer bringing to the notice of the Presiding Officer that there is clear violation of certain terms under the compromise decree dated 15.11.1991 and that the decree holder Batik is not entitled to seek recovery certificate.
5. The Presiding Officer by order dated 14.1.2005 considered the gamut of contentions raised before him. However, in paragraph 8 of the order, directed the objections so raised in the application could only be examined by the Recovery Officer in the execution proceedings. In other words, the Presiding Officer left the issue open for the Recovery Officer to decide. It is this direction Which has been challenged in this appeal.
6. As indicated, I have heard the learned Counsel for the appellants as well as the learned Counsel for the respondent-Bank. I have also heard Mr. Sanjiv Kakra, amicus curiae, appointed by this Court, Mr. Sanjiv Kakra drew my attention to the provision appearing in Section 25 of the Act which primarily deals with modes of recovery of debt to be followed by a Recovery Officer. He further drew my attention to Section 26, Section 31 and Section 31A of the Act and submitted that the powers conferred on the Recovery Officer is limited to the extent of any objections that would be raised in the execution proceedings by a party which are not related with correctness of recovery certificate. Counsel stated that when once the Presiding Officer issues the recovery certificate, the role of the Recovery Officer is to initiate execution proceedings and is not competent to decide the correctness of such certificate.
7. Mr. Hemant Choudhary, learned Counsel for the respondent-Bank on the contrary stated under the provisions of the Act, the Recovery Officer who intiates execution proceedings when is competent to hear all objections, the Tribunal was justified in directing the Recovery Officer to decide all the objections raised by the appellants herein. Counsel pleaded the order passed by the Presiding Officer is in tune with the scheme of the Act, and no interference is required.
8. Sections 25, 26, 27, 28 and 29 of the Recovery of Debts Due to Banks and Financial Institutions Act are relevant for understanding the scope of power and jurisdiction exercised by the Recovery Officer under the scheme of the Act. Section 25 provides the modes of recovery of debts. Section 26 which speaks about the validity of a certificate and amendment thereof reads thus :
(1) It shall not be open to the defendant to dispute before the Recovery Officer the correctness of the amount specified in the certificate and no objection to the certificate on any other ground shall also be entertained by the Recovery Officer.
(2) Notwithstanding the issue of a certificate to a Recovery Officer, the Presiding Officer shall have power to withdraw the certificate or correct any clerical or arithmetical mistake in the certificate by sending an intimation to the Recovery Officer.
(3) The Presiding Officer shall intimate to the Recovery Officer any order withdrawing or cancelling a certificate or any correction made by him under Sub-section (2).
9. Section 28 also provides, other modes of recovery apart from the modes of recovery indicated in Section 25. Section 29 is yet another provision which provides:
The provisions of the Second and Third Schedules to the Income Tax Act, 1961 (43 of 1961) and the Income Tax (Certificate Proceedings) Rules, 1962, as in force from time to time shall, as far as possible, apply with necessary modifications as if the said provisions and the rules referred to the amount of debt due under this Act instead of the Income Tax.
Provided that any reference under the said provisions and the rules to the "assessee" shall be construed as a reference to the defendant under this Act.
10. Section 30 provides appeal against the order of Recovery Officer before the Appellate Authority.
11. A combined reading of these provisions appearing under Chapter V of the Act, it is clear that after receipt of recovery certificate, the Recovery Officer shall proceed to recover the dues as syndicated in the certificate through various methods. The Recovery Officer cannot modify or correct the recovery certificate. It shall only be the Presiding Officer who is competent to correct or modify or withdraw the recovery certificate issued to the Recovery Officer. It is argued by the learned Counsel for the respondent-Bank that when the Recovery Officer has the power to hear objections raised during the course of recovery proceeding such as dispute with regard to title of property, claims of legal heirs etc. and such other objections relating to the procedure to be followed under Second and Third Schedules of the Income Tax, applying the same analogy the Recovery Officer shall be competent to decide the correctness of recovery certificate as well. I am afraid, this submission has to be rejected outright. From the facts of the case, it emerges that a compromise decree was passed by the Additional Sub-Judge, Faridabad in O.S. No. 350 of 1981 on 15.11.1991. The case of the appellants is that the respondent-Bank filed a petition under Section 31A of the Act, seeking a certificate, enabling the Bank to recover its dues. At that stage, the appellants filed objections bringing to the notice of the Tribunal that the compromise decree passed on 15.11.1991 was loaded with certain conditions and since the Bank failed to comply with those conditions, the Bank is not entitled to seek the recovery certificate from the Tribunal.
12. It is noticed that the Presiding Officer instead of deciding whether the respondent-Bank was entitled to seek a certificate in terms of Section 31A of the Act, issued certificate without considering the objections. However permitted the appellants to raise all such objections before the Recovery Officer. As discussed elaborately, the provisions contained in Chapter V of the Act does not clothe such powers with the Recovery Officer to examine the correctness of the certificate.
13. It may be made clear the powers exercisable by the Presiding Officers and Recovery Officers are distinct. Under the scheme of the Act, the Recovery Officer is enjoined with certain amount of freedom except where there is a specific provision which requires prior permission of the Presiding Officer to be obtained. Section 7(2) of the Act speaks about the Recovery Officers and other officers and employees of a Tribunal shall discharge their functions under the general superintendence of the Presiding Officer. It cannot be said that the Recovery Officer functions under the control of the Presiding Officer. It is clear from the provisions under Section 30 of the Act which says any order passed by the Recovery Officer is appealable before the Presiding Officer.
14. As envisaged under Section 26 or the Act, once a recovery certificate is issued by the DRT, the Recovery Officer cannot even look to the correctness of the certificate, but has to proceed further to recover the dues indicated in the recovery certificate. Therefore, I am or the view, the Tribunal could not have left the issue or adjudication to the Recovery Officer as to whether the Bank was entitled to seek a recovery certificate in terms of a compromise decree, in the background of objections raised by the appellants that certain terms of the decree have not been complied with. This particular issue, in my considered view, could only be decided by the Presiding Officer and not by the Recovery Officer.
15. In the result, the order under appeal is set aside. Consequently, the matter is remitted back to the Presiding Officer, DRT, Chandigarh who shall hear the objections raised by the appellants on the question whether the Bank is entitled to seek certificate and decide the matter according to law. Since the controversy with regard to entitlement of recovery certificate by the Bank has not been decided by the earlier Presiding Officer, the certificate issued stands cancelled. Once the Presiding Officer takes an appropriate view on the objections raised after hearing both the parties, it shall be open to the Presiding Officer to act upon and issue such orders accordingly to law.
16. It is noticed that the matter seems to be very old, hence it is desired that the Presiding Officer decide the objections raised by the appellants herein on priority basis preferably on or before 30.11.2005. Since both the parties are present before this Court, let the parties appear before the DRT, Chandigarh on 3.10.2005 on which date, the matter shall stand posted. Thereafter, the Presiding Officer according to the convenience of the Court decide the matter according to law as indicated above.
17. This Court places on record its appreciation for the valuable assistance rendered by Mr. Sanjiv Kakra, Advocate who is appointed as amicus curiae to assist this Court.
18. LR Copy to be marked.