Calcutta High Court
Prabir Chatterjee vs Icici Bank Limited & Others on 1 October, 2010
Author: Sanjib Banerjee
Bench: Sanjib Banerjee
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GA No. 2555 of 2010
CS No. 13 of 2008
IN THE HIGH COURT AT CALCUTTA
ORDINARY ORIGINAL CIVIL JURISDICTION
PRABIR CHATTERJEE
-Versus-
ICICI BANK LIMITED & OTHERS
For the Defendant No. 1: Mr Hirak Kumar Mitra, Sr Adv.,
Mr Soumen Sen, Adv.,
Mr Sourav Kr. Mukherjee, Adv.,
Mr P.C. Ghosh, Adv.,
Mr Moloy Seal, Adv.
For the Plaintiff: Mr Samit Talukdar, Sr Adv.,
Mr Dhruba Ghosh, Adv.,
Ms Hasnuhana Chakraborty, Adv.,
Mr Soumyajit Ghosh, Adv.,
Mr Ranjit Kr. Basu, Adv.
For Defendant Nos. 2, 3 & 5: Mr Amitava Das, Adv.,
Mr R.L. Chakraborty, Adv.,
Ms Vaswati Chakraborty, Adv.,
Mr Pingal Chatterjee, Adv.
Hearing concluded on: September 16, 2010.
BEFORE
The Hon'ble Justice
SANJIB BANERJEE
Date: October 1, 2010.
SANJIB BANERJEE, J. : -
The first defendant bank has applied for a permanent stay of the suit and,
in the alternative, for this suit to be transferred to the Debts Recovery Tribunal
where the first defendant has instituted recovery proceedings against the plaintiff
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as the principal debtor and the other defendants as guarantors under Section 19
of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. The
bank says that the alleged cause of action of the plaintiff in this suit is so
inextricably connected to the bank's claim made before the tribunal that it would
be embarrassing if the two actions proceeded in the two fora. The bank suggests
that in view of the mandatory provisions of the said Act of 1993 the civil court
must relinquish its authority in favour of the tribunal in matters relating to
claims and counter-claims between banks and their constituents.
Some fundamental issues have arisen, not the least of them being the
constitutional issue as to the erosion of the inalienable obligation of the judiciary
in the matters relating to adjudication. For, whatever law may be enacted and
whatever statute may be cited, if there is a doubt it has to be resolved with the
suprema lex in mind and the scheme of state functioning ordained by it. That is,
with respect, not to suggest that matters already settled by higher authorities can
be revisited at this base level, but the unquestionable primacy of the wing of state
in matters concerning the mechanism of adjudication has to be preserved under
the constitutional scheme of things.
It is with such preface that the present request of this private bank has to
be seen as it asserts that the civil court must yield to a tribunal since the
principal issue to be adjudicated is as to whether there is a banker-constituent
relationship between the first defendant and the plaintiff and since this suit will
necessarily involve the assessment as to whether any debt is due from the
plaintiff to the bank within the meaning of the word "debt" in the said Act of
1993. As in the usual course and notwithstanding the exalted status that the
first defendant bank claims, it is the plaint which has to be subjected to scrutiny.
It is the plaint that defines the contours of this action and holds the key in the
matter of assessment of the propriety of the unexceptional plea of the applying
defendant. This suit was launched against the bank early in the year 2008 and
the plaint therein was amended shortly thereafter to add the other defendants
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and to include some additional facts and reliefs. The suit was instituted with
leave under Order II Rule 2 of the Code of Civil Procedure. Post-amendment, the
reliefs claimed in the plaint are as follows:
"a) Declaration that the agreement dated 29th August, 2006 entered into
between the plaintiff and the defendant is unenforceable at the instance of
the defendant;
b) Leave for delivery up and cancellation of the agreement dated 29th
August, 2006;
c) Mandatory injunction directing the defendant forthwith to return to
the plaintiff the original Ware House Receipts particulars whereof are set
out in Schedule "A" hereto and/or alternatively in the event the
agricultural produce in respect whereof the said Ware House Receipts had
been issued had already been sold or not available, a decree for
Rs.1,21,75,000/- approximately being the price of the said agricultural
produce;
cc) Perpetual injunction restraining the defendant No. 1, its servants,
agents or assigns from trying to encash the two undated blank cheques
bearing Nos. 072954 and 072955 both drawn on Punjab & Sind Bank,
Chowringhee Branch;
ccc) Mandatory injunction directing the defendant No. 1 not to encash
and to return to the plaintiff the two undated blank cheques bearing Nos.
072954 and 072955 both drawn on Punjab & Sind Bank, Chowringhee
Branch;
d) A decree for Rs.16,32,545/- being the maturity value of the Fixed
Deposit Receipt being No. 1298719 together with further interest accrued
thereon after maturity till payment thereof.
e) Perpetual Injunction restraining the defendant from giving any effect
on further effect to the letter dated 30th August, 2007 or the agreement
dated 29th August, 2006;
f) Temporary injunction;
g) Accounts;
h) Attachment;
i) Injunction;
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j) Receiver;
k) Costs;
l) Such further and/or other reliefs;"
The summary of the plaintiff's case as is evident from the plaint is as
follows:
(i) In August, 2006 the plaintiff came to learn that the bank was
offering credit facilities under a scheme known as "Warehouse Receipts
Based Financing" under which an agriculturist could obtain loan from the
bank by submitting the original warehouse receipts evidencing storage of
agriculture produce in authorised warehouses.
(ii) The plaintiff claims to have purchased agricultural produce and
stored the same in a warehouse owned by the added second defendant and
obtained nine warehouse receipts. The second defendant is described as a
managing and collection (M & C) agent of the bank.
(iii) The plaintiff carried the warehouse receipts to the bank to obtain
credit facilities and in August, 2006 executed relevant documents and
deposited the receipts with the bank. Since the bank demanded further
security, the plaintiff made a fixed deposit of Rs.15 lakh and made over the
original receipt thereof to the bank.
(iv) The plaintiff claims that despite request, the bank did not disburse
any loan to the plaintiff. The plaintiff obtained credit facilities from the
second defendant firm, of which the three other defendants are partners,
and says that he "did not pay much attention to the failure of the (bank) to
advance the loan inasmuch as the plaintiff considered his Ware House
Receipts to be in the safe custody of the (bank)".
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(v) Early in September, 2007 the plaintiff received a notice dated August
30, 2007 by which the bank demanded payment of a sum of
Rs.73,84,341/- which included penal interest. The plaint says that the
plaintiff was not liable to make any payment to the bank since he had not
availed of any credit facility from such party.
(vi) The plaintiff responded to the bank's notice by advocate's letter of
October 11, 2007 denying his liability. A reminder was sent on November
21, 2007. The plaintiff apparently made enquiries with the bank but was
unable to ascertain as to whether the agricultural produce under his
warehouse receipts had been sold as had been threatened by the bank in
its letter of August 30, 2007.
(vii) The plaintiff requested the bank to return the warehouse receipts
and release his fixed deposit of Rs.15 lakh with the interest accrued
thereon, but the bank did not respond to such entreaties. The plaint claims
that the bank has illegally held on to the fixed deposit and the warehouse
receipts and has attempted to unlawfully foist a liability on the plaintiff.
(viii) The value of the agricultural produce stored under the warehouse
receipts was to the tune of Rs.94,97,475/- at the relevant time.
(ix) The plaint makes out a case of fraud perpetrated by the bank in
raising a false claim against the plaintiff. The additional paragraphs
subsequently incorporated in the plaint reveal that two undated blank
cheques had been made over by the plaintiff to the bank in advance as
security against the proposed loan to be disbursed by the bank.
Though it may not be absolutely relevant in the context, but for
completeness, an order dated January 31, 2008 passed on the plaintiff's
interlocutory application needs to be noticed. The order recorded the plaintiff's
claim that notwithstanding security as aforesaid being furnished in anticipation
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of a loan, no money had been disbursed to him by the bank. On the first day that
they plaintiff moved his interlocutory application upon notice, the bank sought to
rely on certain documents and, a couple of adjournments later, the bank
produced a bunch of documents running into 123 pages. The bank contended
that it had appointed M & C agents for the purpose of ascertaining which of the
traders dealing in agricultural produce would require credit facilities and would
be suited to obtain the same. The bank claimed that it had engaged the now
added second defendant as its M & C agent and such agent identified the plaintiff
as one qualified to avail of the loan under the relevant scheme. The bank claimed
that though it executed an agreement with the plaintiff on August 29, 2006 but
the disbursement was made through the M & C agent so as to bind such agent to
the transaction as a guarantor. The bank relied on the petition in the plaintiff's
interlocutory application where the plaintiff had spoken of having received money
from the M & C agent. The bank insisted that it was such money that the plaintiff
drew from the M & C agent which had been disbursed by it to the plaintiff. The
bank relied on the bank account of the M & C agent from which it appeared that
the plaintiff had obtained substantial payments from the M & C agent's account.
After recording such facts, the ad-interim order of January 31, 2008 noticed the
immediate issue in the following words:
"For the moment, the plaintiff says that (he) had furnished security of value
of about Rs.1 crore by way of deposit of foodgrains in the warehouse
chosen by the bank and had furnished a fixed deposit of Rs.15 lakh. The
bank submits that the foodgrains have not yet been sold and the fixed
deposit is being retained by the bank."
A receiver was appointed for such part of the foodgrains that the bank
would be desirous of selling. The sale was directed to be conducted under the
aegis of the receiver and upon notice to the plaintiff. The proceeds were required
to be deposited in a separate account with the bank and the bank was called
upon to renew the fixed deposit made by the plaintiff, initially for a period of six
months. The order also recorded the plaintiff's submission that in view of what
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had been claimed by the bank, the M & C agent would be required to be
impleaded.
The plaintiff's interlocutory application was disposed of a few weeks back
on August 13, 2010. By then the plaint had long been amended, new defendants
impleaded, the body of the plaint buttressed with additional facts and further
reliefs incorporated. By then the plaintiff had filed a second application and the
defendants' present request for stay of the action had also been launched. The
order of August 13, 2010 noticed that the reports filed by the receiver revealed
that there was no trace of the agricultural produce and recorded that the bank
had not appropriated the proceeds from the fixed deposit furnished by the
plaintiff but had made a quantum deposit of the amount. The bank was
restrained from appropriating the proceeds of the deposit without previous leave
of court. The bank made a statement that the two blank cheques made over by
the plaintiff have been retained in such form by the bank. The plaintiff's
applications, GA No. 184 of 2008 and GA No. 3280 of 2008, were disposed of and
the receiver discharged.
The bank says that it has, in June of this year, initiated proceedings before
the appropriate Debts Recovery Tribunal under Section 19 of the 1993 Act
against the other parties herein. The bank's claim is said to arise out of money
lent and advanced to the plaintiff under a rural financing arrangement in which
the second defendant herein acted as the M & C agent.
The substance of the bank's claim in the Section 19 proceedings has been
summarised in the body of its present application. In the initial paragraphs of the
summary of its claim, the bank has referred to the role of an M & C agent under
the scheme of financing agriculturists as defined by the Reserve Bank of India
guidelines. The essence of the bank's claim is as follows:
(i) The second defendant herein, a firm comprising the three other
defendants as partners, applied to the bank for sanction of credit facilities
to be disbursed through the second defendant under the Warehouse
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Receipt Based Finance Scheme for an initial limit of Rs.3.5 crore which was
subsequently enhanced to Rs.25 crore.
(ii) The second defendant firm was appointed as an M & C agent for
identifying farmers, contract farming organisers (CFOs) and village-level
aggregators (VLAs) under a credit arrangement letter of February 9, 2006,
an M & C agency agreement of February, 2006 and the notes of
amendment thereto of March 22, 2006 and May 29, 2006.
(iii) Under its arrangement with the bank, the second defendant M & C
agent identified, inter alia, the plaintiff as a borrower and recommended
the grant of a loan of limit of Rs.1 crore repayable within a year with
interest at 10 per cent per annum.
(iv) The plaintiff thereafter approached the bank and on August 29, 2006
an agreement was entered into between such parties. The credit facility
was extended to the plaintiff by the bank as part of the commodity-based
finance scheme and against a pledge of 487.07 MT of mustard seeds of
value of Rs.1,07,15,000/- as on the date of declaration.
(v) The bank claims to have disbursed an amount of Rs.66,48,232.50 to
the plaintiff through the M & C agent.
(vi) The bank says that the plaintiff as borrower and the other
defendants herein as guarantors are liable to repay the bank. The loan
account was declared as a non-performing asset (NPA) on November 22,
2007.
(vii) The bank noticed a shortage in stock (presumably, of the foodgrains)
and lodged a complaint with the police on September 28, 2007.
(viii) The principal claim before the tribunal is for a certificate for the
recovery of a sum of Rs.1,20,76,293.39p. from the defendants to the
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Section 19 proceedings together with interest at the rate of 23.75 per cent
per annum from March 16, 2010.
The bank now says that under the said Act of 1993 the Debts Recovery
Tribunal is the exclusive forum for recovery of any debt as defined in Section 2(g)
of the Act. The bank claims that the certificate that it has sought before the
tribunal is undoubtedly on account of a liability, inclusive of interest, from the
defendants in such proceedings as due in course of a business activity
undertaken by the bank that was legally recoverable as on the date of the
application. In asserting the exclusivity of the tribunal under the said Act, the
bank has referred to Sections 17 and 18 thereof and to the procedure envisaged
by Section 19. Section 17 authorises a tribunal established under the 1993 Act
to exercise "jurisdiction, powers and authority to entertain and decide
applications from ... banks ... for recovery of debts due to such banks ..." Section
18 of the Act mandates that save in exercise of the Supreme Court's plenary
powers and the High Courts' constitutional authority under Articles 226 and 227
thereof, "no court or other authority shall have, or be entitled to exercise, any
jurisdiction, powers or authority ... in relation to matters specified in Section 17"
of the Act on and from the appointed day. Section 19 of the 1993 Act provides for
the manner in which claims for recovery of debt under that Act are to be
entertained and dealt with by a tribunal set up thereunder. An amendment of
January, 2000 has included constituents' pleas of set-off and counter-claim to be
entertained by the tribunal. As to a counter-claim set up by a defendant to the
Section 19 proceedings, the applicant bank has a right to petition the tribunal to
delink the counter-claim from the applicant bank's claim if the counter-claim
ought to be disposed by way of an independent action.
Sub-sections (6) to (11) of Section 19 of the 1993 Act may be noticed in the
context:
19. Application to the Tribunal.--
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"...
(6) Where the defendant claims to set-off against the applicant's demand
any ascertained sum of money legally recoverable by him from such
applicant, the defendant may, at the first hearing of the application, but
not afterwards unless permitted by the Tribunal, present a written
statement containing the particulars of the debt sought to be set-off.
(7) The written statement shall have the same effect as a plaint in a cross-
suit so as to enable the Tribunal to pass a final order in respect both of the
original claim and of the set-off.
(8) A defendant in an application may, in addition to his right of pleading a
set-off under sub-section (6), set up, by way of counter-claim against the
claim of the applicant, any right or claim in respect of a cause of action
accruing to the defendant against the applicant either before or after the
filing of the application but before the defendant has delivered his defence
or before the time limited for delivering his defence has expired, whether
such counter-claim is in the nature of a claim for damages or not.
(9) A counter-claim under sub-section (8) shall have the same effect as a
cross-suit so as to enable the Tribunal to pass a final order on the same
application, both on the original claim and on the counter-claim.
(10) The applicant shall be at liberty to file a written statement in answer to
the counter-claim of the defendant within such period as may be fixed by
the Tribunal.
(11) Where a defendant sets up a counter-claim and the applicant contends
that the claim thereby raised ought not to be disposed of by way of
counter-claim but in an independent action, the applicant may, at any time
before issues are settled in relation to the counter-claim, apply to the
Tribunal for an order that such counter-claim may be excluded, and the
Tribunal may, on the hearing of such application make such order as it
thinks fit.
..."
The bank contends that if a constituent has the right under the amended
provisions of the 1993 Act to claim set-off or to lodge a counter claim, an
independent suit for such purpose should ordinarily not be entertained or, at any
rate, not proceeded with in a civil court once the bank's application under
Section 19 of the 1993 Act is launched. The bank says that in view of the
exclusivity conferred on the tribunal by the 1993 Act, a bank is precluded from
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urging its claim before a civil court and, as such, the constituent should be
pushed to the tribunal since the bank after having nudged the civil court to take
such step would be precluded from urging before the tribunal that the
constituent's counter-claim should not be considered by it. The bank submits
that if the two actions were to continue before two authorities there may be a
conflict of decisions and, in-keeping with the avowed purpose of the 1993 Act,
the civil court should allow matters between banks and their constituents to be
adjudicated upon by the tribunal under the said Act, particularly if a bank
makes a request in such regard.
The bank contends that the rule of res judicata is not a procedural matter
covered under the Code of Civil Procedure but is a matter of public policy. The
bank says that if it pleads the case that it has run in its Section 19 application in
the written statement before this Court, an adverse decision herein would
preclude the bank from asserting its substantive claim in the only designated
forum which is authorised to receive it. The bank suggests that in the present
case the tribunal would be embarrassed to take up the bank's claim when a
connected matter is pending before a forum which exercises authority over the
tribunal under Articles 226 and 227 of the Constitution. The bank submits that
it is more likely than not that its claim before the tribunal will ripen for hearing
before the present suit progresses to trial. The bank implores the court to
visualise the plight of the presiding officer of the tribunal and his embarrassment
in attempting to prejudge an issue pending before a forum which is inarguably
the tribunal's superior.
The bank refers to a judgment reported at (2010) 6 SCC 193 (Eureka
Forbes Ltd v. Allahabad Bank) for the extended meaning given to the word "debt"
therein. The bank refers to another judgment reported at (2006) 5 SCC 72 (Indian
Bank v. ABS Marine Products (P) Ltd) to suggest that though the causes of action
of the bank and the constituent in that case were not found to be inextricably
connected, the judgment implies that if the claims of the two rival parties in the
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different fora were to be found to be inexorably linked, it would be desirable to
stay the action before the civil court and encourage the constituent to approach
the tribunal since it cannot be done the other way round.
A judgment of this Court reported at 49 CWN 172 (Snow White Food
Products Co. Ltd. v. The Punjab Vanaspati Supply Co.) has been placed on behalf
of the bank for the principle that the inherent power of the Court to grant
temporary injunctions is not limited to or restricted by the provisions of the Code
and that the exercise of such inherent power is not confined to persons residing
or carrying on business within the jurisdiction of the Court.
The bank says that Section 10 of the Code is not applicable in the present
case, but it asserts that Section 10 is a mere procedural right whereas the bank
claims a substantive right to have the present suit stayed in view of the
subsequent proceedings brought by it before the tribunal. The bank says that its
claim before the tribunal for a certificate would necessarily raise the question as
to whether a banker-constituent relationship subsists between it and the
plaintiff. The bank says that it is not its case that this Court did not have
jurisdiction to entertain the suit; on the contrary, it acknowledges that this Court
had the jurisdiction to receive the suit and has the authority to continue it, but it
should exercise its discretion to permanently stay the suit and give liberty to the
plaintiff to raise his defence and counter-claim before the tribunal. The bank
submits that the authorities that are available relate either to the issue relating
to the ouster the jurisdiction of the civil court upon the 1993 Act coming into
place or as to the desirability of a claim pending in a civil court being transferred
to the tribunal.
The bank cites a judgment reported at AIR 1956 Hyd 91 (Md. Fazlur
Rahman v. Custodian of Evacuee Property) for the principle that if a statute
confers jurisdiction on an authority to do something, it would imply that the
authority would also have the power to do things which are incidental to the
main purpose. The bank's suggestion is that if the 1993 Act confers exclusivity
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on the tribunals set up thereunder in matters pertaining to bank claims of a
certain value, the corollary would be that the civil court not retain any action
that would impede or embarrass the adjudication before a tribunal. The Full
Bench of the Hyderabad court addressed the incidental powers that the
Custodian under the Evacuee Property Act, 1950 could exercise. The judgment
was rendered on a petition for a writ of certiorari against the Custodian on an
allegation that the Custodian refused to release a property in which evacuees
under the said Act had only a share. The court held that the primary object and
purpose of all statutory construction or interpretation would be to ascertain the
intention of the lawmakers and to make the law effective. The court held that the
essence of the Act was to provide for the administration of evacuee property but
the statute did not specify the role of the custodian if one or more evacuees held
a property jointly with non-evacuees. The Full Bench concluded that the
intention of the legislature was that the Custodian would also administer such
property in which an evacuee had any right, title or interest jointly with non-
evacuees. The court observed that where a statute specified a genus, species
thereunder may be understood to have been intended to be included therein. In
the context of that matter, the genus was "property" and it was found to include
the species "joint property." The ancillary power that the court implied in that
case was for the purpose of "determining and making effective the legislative
wheel."
A judgment reported at 1962 Supp (1) SCR 381 (Bidi, Bidi Leaves &
Tobacco Merchants' Association v. State of Bombay) has been placed by the bank
in the same vein. The bank has placed paragraph 20 of the report which
summarises the legal position:
"20. "One of the first principles of law with regard to the effect of an
enabling act", observes Craies, "is that if a Legislature enables something
to be done, it gives power at the same time by necessary implication to do
everything which is indispensable for the purpose of carrying out the
purposes in view". The principle on which this doctrine is based is
contained in the legal maxim "Quando lex aliquid concedit concedere videtur
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et illud sine quo res ipsa ease non potest". This maxim has been thus
translated by Broom thus: "whoever grants a thing is deemed also to grant
that without which the grant itself would be of no effect". Dealing with this
doctrine Pollock, C.B., observed in Michael Fenton and James Fraser v.
John Stephen Hampton "it becomes therefore all important to consider the
true import of this maxim, and the extent to which it has been applied.
After the fullest research which I have been able to bestow, I take the
matter to stand thus: Whenever anything is authorised, and especially if,
as matter of duty, required to be done by law, and it is found impossible to
do that thing unless something else not authorised in express terms be
also done, then that something will be supplied by necessary intendment".
This doctrine can be invoked in cases "where an Act confers a jurisdiction
it also confers by implication the power of doing all such acts, or employing
such means, as are essentially necessary to its execution." In other words,
the doctrine of implied powers can be legitimately invoked when it is found
that a duty has been imposed or a power conferred on an authority by a
statute and it is further found that the duty cannot be discharged or the
power cannot be exercised at all unless some auxiliary or incidental power
is assumed to exist. In such a case, in the absence of an implied power the
statute itself would become impossible of compliance. The impossibility in
question must be of a general nature so that the performance of duty or
the exercise of power is rendered impossible in all cases. It really means
that the statutory provision would become a dead-letter and cannot be
enforced unless a subsidiary power is implied. This position in regard to
the scope and effect of the doctrine of implied powers is not seriously in
dispute before us. The parties are at issue, however, on the question as to
whether the doctrine of implied powers can help to validate the impugned
clauses in the notification."
In that case the validity of a notification issued under Section 5 of the
Minimum Wages Act, 1948 was questioned. The challenge was on the ground
that the notification was without jurisdiction in respect of some of the clauses as
the authority that had issued the notification had no power to make provision for
deciding as to the extent to which "chhat" would be permitted to be taken into
account for assessing minimum wages. The respondent suggested that the
impugned clauses had been introduced for the benefit of the workers. The question that the Supreme Court posed for itself was as to whether the injustice resulting from the practice of discarding bidis and not making any payment to the workers could be checked, controlled and regulated by the issuance of a 15 notification. It was in such context that the doctrine of implied power was invoked by the respondent. After noticing the purport of the doctrine, the court held that the "doctrine of implied powers can be invoked where without the said power the material provision of the Act would become impossible of enforcement"
(Paragraph 23). The court ruled that Section 5 of the Minimum Wages Act required the fixation of minimum rates of wages, which the notification did by its initial clauses; but the impugned clauses of the notification had been made without authority even though they were introduced to check the menace of the provisions for payment of the stipulated minimum wages being rendered ineffective by the employers.
The bank says that the amendment to the 1993 Act that came into effect in January, 2000 was introduced to remove some lacunae in the statute. Thus it became permissible for the constituent to claim a set-off and for the constituent to even lodge a counter-claim. The bank says that even though Section 19 does not specifically provide for any interim order to be granted in favour of a counter- claiming constituent and though the tribunal under the said Act may pass final order on a counter-claim but it cannot issue a certificate, a purposive interpretation of the Act should be adopted. At the very lowest, the bank says, that there may be some obvious omission in the statute which the court should fill in as in casus omissus.
In such context the bank has relied on a judgment reported at (2003) 2 SCC 455 (Unique Butyle Tube Industries Pvt. Ltd. v. U.P. Financial Corpn). The question that fell for consideration in that case was as to whether the respondent financial corporation could maintain proceedings under a State Act of 1972 despite Section 34(2) of the 1993 Act. The matter emanated from the Allahabad High Court decision that found that the financial corporation had a choice to proceed either under the 1993 Act or under the State Act of 1972. The argument on behalf of the respondent before the Supreme Court was that since the procedure under the 1993 Act was in pari materia with that under the State 16 Financial Corporations Act, 1951, there was a case made out for applying the principle of casus omissus to Section 34(2) of the 1993 Act and read into such provision that recovery of under the State Act of 1972 was also permissible. The legal principle is stated at paragraph 14 of the report:
"14. Two principles of construction -- one relating to casus omissus and the other in regard to reading the statute as a whole -- appear to be well settled. Under the first principle a casus omissus cannot be supplied by the court except in the case of clear necessity and when the reason for it is found in the four corners of the statute itself but at the same time a casus omissus should not be readily inferred and for that purpose all the parts of a statute or section must be construed together and every clause of a section should be construed with reference to the context and other clauses thereof so that the construction to be put on a particular provision makes a consistent enactment of the whole statute. This would be more so if literal construction of a particular clause leads to manifestly absurd or anomalous results which could not have been intended by the legislature. "An intention to produce an unreasonable result", said Danckwerts, L.J., in Artemiou v. Procopiou (All ER p.544-I) "is not to be imputed to a statute if there is some other construction available". Where to apply words literally would "defeat the obvious intention of the legislation and produce a wholly unreasonable result" we must "do some violence to the words" and so achieve that obvious intention and produce a rational construction. [Per Lord Reid in Luke v. IRC where at AC p.577 he also observed: (All ER p.664 I) "This is not a new problem, though our standard of drafting is such that it rarely emerges."] Therefore, the High Court's conclusions holding proceedings under the U.P. Act to be in order are indefensible."
The bank also places a judgment reported at (1996) 7 SCC 37 (O.S. Singh v. Union of India) where the principle of casus omissus was applied to fill in certain gaps in the relevant regulations. Ordinarily, the principle may be more readily invoked and gaps left in subordinate legislation may be filled in. Rules or regulations framed under any statute would either be under specific provisions of the statute which would earmark the extent of the rules or regulations, or the gap left in any rules or regulations may be filled up on the basis of the instruction in such regard available in the text of the statute. To fill in a gap in a statute is an altogether different cup of tea. At paragraph 9 of the report in O.S. Singh, the Supreme Court noticed both the traditional view and the more recent 17 purposive view. The traditional approach is that the court cannot legislate for casus omissus and that if there is a gap or an omission in the statute the lacuna cannot be supplied by a court by judicial construction as it is for the law-making authority to remove the defect. The essence of the purposive view is that when a defect appears a judge must set to work on the constructive task of finding the intention of the legislature and then he must supplement the written words so as to give "force and life" to the intention of the legislature. Such school of thought advocates that a "judge must not alter the material of which the Act is woven, but he can and should iron out the creases." The judgment in O.S. Singh noticed that the dicta in Seaford Court Estates Ltd v. Asher [(1949) 2 All ER 155] and in Magor & St Mellons Rural Distt Council v. Newport Corpn [(1950) 2 All ER 26], though accepted by the Supreme Court here, had been disapproved by the House of Lords; which decision has also been cited with approval by the Supreme Court.
The bank urges that the word "defendant" in the context of sub-sections (12), (13) and (20) of Section 19 of the 1993 Act should also apply to a bank when a counter-claim is received against it from a constituent. The bank says that similarly, the word "defendant" in Section 25 of the 1993 Act would also apply to a bank if the final order under Section 19(7) of the tribunal is against a bank.
The bank says that the challenge to the vires of the 1993 Act was repelled by the Supreme Court inter alia on the appreciation that the perceived lacunae in the original Act had been removed by the amendment introduced in January, 2000. The bank has relied on the judgment reported at (2002) 4 SCC 275 (Union of India v. Delhi High Court Bar Assn) where the amendment to the Act and the rules was noticed at paragraph 21. The bank refers to paragraphs 24 and 25 of the report to drive home the point that the highest court of the land did not regard the 1993 Act to be an encroachment into the functioning of the judiciary:
"24. The manner in which a dispute is to be adjudicated upon is decided by the procedural laws which are enacted from time to time. It is because of the enactment of the Code of Civil Procedure that normally all disputes between the parties of a civil nature would be adjudicated upon by the civil 18 courts. There is no absolute right in anyone to demand that his dispute is to be adjudicated upon only by a civil court. The decision of the Delhi High Court proceeds on the assumption that there is such a right. As we have already observed, it is by reason of the provisions of the Code of Civil Procedure that the civil courts had the right, prior to the enactment of the Debts Recovery Act, to decide the suits for recovery filed by the banks and financial institutions. This forum, namely, that of a civil court, now stands replaced by a Banking Tribunal in respect of the debts due to the bank. When in the Constitution Articles 323-A and 323-B contemplate establishment of a Tribunal and that does not erode the independence of the judiciary, there is no reason to presume that the Banking Tribunals and the Appellate Tribunals so constituted would not be independent, or that justice would be denied to the defendants or that the independence of the judiciary would stand eroded.
"25. Such Tribunals, whether they pertain to income tax or sales tax or excise or customs or administration, have now become an essential part of the judicial system in this country. Such specialised institutions may not strictly come within the concept of the judiciary, as envisaged by Article 50, but it cannot be presumed that such Tribunals are not an effective part of the justice delivery system, like courts of law. It will be seen that for a person to be appointed as a Presiding Officer of a Tribunal, he should be one who is qualified to be a District Judge and, in case of appointment of the Presiding Officer of the Appellate Tribunal he is, or has been, qualified to be a Judge of a High Court or has been a member of the Indian Legal Service who has held a post in Grade I for at least three years or has held office as the Presiding Officer of a Tribunal for at least three years. Persons who are so appointed as Presiding Officers of the Tribunal or of the Appellate Tribunal would be well versed in law to be able to decide cases independently and judiciously. It has to be borne in mind that the decision of the Appellate Tribunal is not final, in the sense that the same can be subjected to judicial review by the High Court under Articles 226 and 227 of the Constitution."
The bank submits that since the purpose of the 1993 Act is to provide a dedicated forum for the adjudication of debts due to banks and financial institutions, the mischief rule should be applied to arrest actions of the present kind and further the larger cause of public funds as embodied in such Act. The bank cites a judgment reported at (1990) 3 SCC 682 (Punjab Land Development and Reclamation Corpn Ltd v. Presiding Officer) and the enunciation of the mischief rule at paragraph 70 of the report. The court approved a passage from 19 Discipline of Law by Lord Denning where the author exhorted that a judge must construe a statute "not only from the language of the statute, but also from a consideration of the social conditions which gave rise to it, and of the mischief which it was passed to remedy, and then he must supplement the written word ..."
The bank has relied on passages from Bennion on Statutory Interpretation (5th Ed.) both on implied ancillary powers and on casus omissus. On implied ancillary powers, the author quotes (at page 497) the rule as expressed in two opinions rendered in A-G v. Great Eastern Rly Co, (1880) 5 App Cas 473:
"... those things which are incident and may reasonably and properly be done under the main purpose [of an enactment], though they may not be literally within it would not be prohibited."
"... What ever may fairly be regarded as incidental to, or consequential upon, those things which the Legislature has authorised, ought not (unless expressly prohibited) to be held by judicial construction, to be ultra vires."
On casus omissus Bennion has this to say at page 885 of the text:
"Meaning narrower than the object (casus omissus) Where the literal meaning of the enactment goes narrower than the object of the legislator, the court may be required to apply a rectifying construction. Nowadays it is regarded as not in accordance with public policy to allow a drafter's inaptitude to prevent justice being done. This was not always the case."
Finally, as to the purpose of the 1993 Act, the bank relies on a recent judgment of this Court reported at 2010 (1) CHN 573 (HDFC Bank Ltd v. Sima Mondal) and places paragraphs 15 to 17 of the report:
"15. An interpretation or a definition clause contained in a statute may imply a broader or a constricted meaning being given to the words or phrases defined if the definition is preceded by the expression, "unless the context otherwise requires." The ordinary and plain meaning of the words of a statute has to be given full importance. Yet, if a literal construction leads to an obvious absurdity, the enactment is to be viewed as a whole 20 and its intention determined by construing all the constituent parts thereof and not by detaching sections or plucking one word out or importing the entirety of the definition of a word into a section where such defined word is employed. In order to get its true import it calls for the enactment to be viewed in retrospect, the reasons for it being engrafted being appreciated and an understanding of the end and objects that it was to subserve. The statement of objects and reasons that prefaces the 1993 Act refers to the then unsatisfactory procedure for recovery of debts due to banks and financial institutions. The statement alludes to the report of a committee that recorded that as at September 30, 1990 more than 15 lakh cases filed by public sector banks and about 304 cases lodged by financial institutions remained pending in various courts. The recovery of debts involved more than Rs.5622 crore in dues of public sector banks and Rs.390 crore of financial institutions. Such locking-up of public money in litigation, the statement emphasises, inhabited proper utilisation and recycling of funds for the development of the country.
"16. Historically, in the early 1980s banks and financial institutions found it suffocating to operate as funds and secured assets remained blocked in protracted litigation, whether they were recovery proceedings filed in regular courts by them or genuine or frivolous actions instituted by the constituents. Banking business was then almost completely State- controlled and the worry was in public funds remaining entangled in time- consuming and ruinous court proceedings. There was a Tiwari Committee set up which recommended setting up independent tribunals for recovering debts of banks and financial institutions. The Narasimham Committee report thereafter culminated in first an ordinance and then the said Act of 1993.
"17. The avowed purpose of the Act is to speed up the recovery of debts due to banks and financial institutions. The stress in the Act is to abridge the process of adjudication. It would be absurd, in the light of the fundamental object of the Act, to understand it to imply that the finality conferred on an arbitral award by Section 35 of the 1996 Act would be undone by such award being required to be made the subject of another round of adjudication under Section 19 of the 1993 Act."
The plaintiff says that a constituent's right to counter-claim before the tribunal is illusory since the bank has a right to petition the tribunal to direct the counter-claim to be removed by suggesting that the counter-claim should be the subject-matter of an independent action. The plaintiff contends that the counter- claim, in any event, cannot continue if a bank withdraws its application under Section 19 of the Act. The plaintiff says that though a right to counter-claim has 21 been conferred on a constituent by the amendment that came into effect in January, 2000 any certificate that may be granted by the tribunal in favour of the constituent would not be executable under the provisions of the said Act but would be required to be made the subject-matter of a subsequent civil suit. The plaintiff submits that he has already paid court fees for instituting the present suit and if the present action is stayed and he is pushed to making a counter- claim before the tribunal he would be required to pay a second set off fees.
The plaintiff contends that the present application is without any basis and the grounds in the application do not warrant any order. He says that none of the three primary reasons proffered by the bank in support of its prayer for permanent stay of the present suit can be accepted for the exercise of the inherent powers of the court under Section 151 of the Code. The plaintiff asserts that multiplicity of proceedings, ends of justice and balance of convenience would not warrant a stay of the previous action. He contends that there is no impediment to the bank proceeding with its claim before the tribunal since the plaintiff has not applied either in this Court or before the tribunal for the arrest of the bank's action which has been brought long after this suit was instituted. The plaintiff says that as to whether the present suit is a preemptive action would require an assessment on merits which cannot be undertaken at this stage. He submits that the bank seeks a permanent stay of this suit only in furtherance of the bank's underlying submission that a suit of the present nature may no longer be maintained in view of the provisions of the said Act of 1993.
The plaintiff refers to two instances where the inherent power of the civil court has been exercised to stay an action or issue an injunction in personam to one of the parties to refrain from proceeding in another forum. The plaintiff first relies on the celebrated judgment reported at 1962 Supp (1) SCR 450 (Manohar Lal Chopra v. Seth Hiralal) where the court cautioned that the inherent power was not to be exercised when its exercise may be in conflict with what had been expressly provided in the Code or against the intention of the legislature. The plaintiff submits that as in Manohar Lal Chopra, the inherent power is ordinarily 22 exercised to arrest an action if it is found to be vexatious or in abuse of the process. The plaintiff refers to another well-known judgment (1961) 1 SCR 884 (Padam Sen v. State of Uttar Pradesh) where the court read Section 151 of the Code to imply as follows:
"8. ... The inherent powers of the Court are in addition to the powers specifically conferred on the Court by the Code. They are complementary to those powers and therefore it must be held that the Court is free to exercise them for the purposes mentioned in section 151 of the Code when the exercise of those powers is not in any way in conflict with what has been expressly provided in the Code or against the intentions of the Legislature. It is also well recognised that the inherent power is not to be exercised in a manner which will be contrary to or different from the procedure expressly provided in the Code."
The plaintiff pursues the same line of argument to show that the inherent power of the court to arrest a suit that it is otherwise maintainable and not found to be vexatious would be sparingly invoked. A Single Bench judgment of this Court reported at AIR 1956 Cal 33 (Hansraj Bajaj v. The Indian Overseas Bank Ltd.) is placed. The defendant bank in that case applied for an injunction restraining the plaintiff from proceeding with its suit in this Court on the ground that the choice of forum by the plaintiff was mala fide, vexatious, embarrassing and intended to defeat justice by preventing the defendant from bringing material and proper evidence to this Court for a just determination of the disputes between the parties. The plaintiff had founded the suit in this Court on the basis of the bank's head office being in Calcutta. The plaintiff in this case says that the defendant here does not meet the tests recognised at paragraph 13 of the report in Hansraj Bajaj:
"(13) The Courts have evolved certain well-defined principles to guide their decision on this point. The first principle is that a mere balance of convenience is not a sufficient ground for depriving a plaintiff of his right of prosecuting his action in or his right of access to the competent Courts of the land.23
The second principle is that Court stays an action brought within the jurisdiction in respect of a cause of action arising entirely out of the jurisdiction when it is satisfied that the plaintiff will thereby suffer no injustice whereas if the action is continued the defendant will, in defending the action, be the victim of such injustice as to amount to vexation and oppression and which vexation & oppression would not arise for the defendant if the action were brought in another accessible Court where the cause of action arose.
In such a case the Courts have also insisted that the onus is upon the defendant to satisfy the Court, first, that the continuance of the action would work an injustice because it would be oppressive or vexatious to him or would be an abuse of the process of the Court, and, secondly, also that the stay will not cause any injustice to the plaintiff.
These principles can be deduced from decisions like - 'Logan v. Bank of Scotland (No. 2)', (1906) 1 KB 141 (C); - 'St. Pierre v. South American Stores Ltd', (1936) 1 KB 382 (D); and - 'Sealey v. Callan', (1953) 1 All ER 942 (E)."
The plaintiff shows that Hansraj Bajaj has been approved by the Supreme Court in the judgment reported at (2006) 3 SCC 100 (Mayar (H.K.) Ltd. v. Owners & Parties, Vessel M.V. Fortune Express). The plaintiff has also relied on a judgment reported at AIR 1987 Gauhati 73 (Subho Ram Kalita v. Dharmeswar Das Koch) for the principle therein as to the circumstances in which an action may be stayed under Section 151 of the Code. The plaintiff has also placed a judgment reported at 54 CWN 110 (Debendra Nath Dutt v. Sm. Satyabala Dassi) where the expression "ends of justice" in Section 151 of the Code has been understood to imply, not vague and indeterminate notions of justice, but justice according to the statutes and laws of the land; the expression cannot be used to override express provisions of the statute "at the dictates of what might be private emotion or arbitrary preference call or conceive to be justice between the parties."
The plaintiff next relies on the ABS Marine Products (P) Ltd case that the bank has also cited. In that case the bank filed for a certificate before the tribunal to recover with interest the amount that it had advanced to the constituent. The constituent filed a suit in this Court for damages on account of 24 the bank's failure to disburse a further sanctioned amount. The bank claimed that the suit was not maintainable in view of the amendment to Section 19 of the Act and insisted that it should be transferred to the tribunal. Such plea failed at both stages in this Court. The Supreme Court framed three questions: whether the subject-matters of the two actions were inextricably connected; whether the Act mandated or required the transfer of an independent suit filed by a borrower against a bank, which had already lodged a claim in the tribunal, to be tried as a counter-claim by the tribunal; and, whether the dictum in the judgment reported at (2000) 7 SCC 357 (United Bank of India v. Abhijit Tea Co. (P) Ltd) was in exercise of the power under Article 142 of the Constitution. The Supreme Court noticed the scope of Section 9 of the Code and observed that Sections 17 and 18 of the 1993 Act bar the civil court's jurisdiction only in regard to claims by a bank or a financial institution for recovery of debt due to such bank or financial institution. The Supreme Court held that sub-sections (6) to (11) of Section 19 of the Act are enabling provisions. As to whether the direction in Abhijit Tea was issued in exercise of the Supreme Court's unique authority under Article 142 of the Constitution, ABS Marine refused to examine such aspect as it found the decision in Abhijit Tea to be distinguishable "both on facts and on law." In Abhijit Tea a bank suit in this Court was disposed of on the basis of an alleged compromise some ten years before the tribunals were set up under the 1993 Act. On an appeal by the bank before a Division Bench of this Court, the compromise decree was set aside in 1998 and by virtue thereof the suit stood restored to the file. The constituent contended that the bank's suit should not be transferred to the tribunal as it was "not pending" on the date that the tribunals came into being. A Single Bench of this Court accepted such contention. The bank challenged such decision before the Supreme Court and the constituent urged there that the bank's suit was inextricably connected with a suit filed by the constituent before this Court and, as such, it was desirable that the suits continue in this Court. One of the issues that arose was whether the bank's claim against the constituent should be retained in this Court since the 25 constituent's suit was pending. The court held that in view of Section 31 of the 1993 Act the bank's suit had to go to the tribunal. In ABS Marine, the court read Abhijit Tea to infer three further features which resulted in the direction for the constituent's suit to be treated as a counter-claim before the tribunal: that it was the constituent's unflinching contention that the two claims were inextricably connected and could not be decided independently; that the bank was agreeable that the constituent's suit be tried along with the bank's claim; and, that the court found that the two claims were inextricably connected. In ABS Marine, the dictum in Abhijit Tea was found to be applicable if two conditions were satisfied:
the subject-matters of the bank's claim and the claim against the bank should be inextricably connected in the sense that a decision in one would affect the decision in the other; and, that both the bank and the constituent should agree for the constituent's suit to be tried as a counter-claim in the bank's application before the tribunal.
Though the word "transfer" has been used both in Abhijit Tea and in ABS Marine in the context of the constituent's suit, strictly speaking, there is no authority for a constituent's suit to be transferred to the tribunal by a civil court. Such restriction will obviously not apply to the Supreme Court which exercises plenary powers over civil courts and tribunals, but it is difficult to imagine how a civil court would be entitled to transfer a constituent's suit to a tribunal established by the 1993 Act. The word "transfer" has thus to be seen as a permission to the constituent to carry its claim to the tribunal. Such permission can only be by way of liberty given to the constituent for a civil court cannot force the constituent to lodge a counter-claim before the tribunal though the combined effect of a stay of the constituent's suit with liberty to the constituent to carry the subject-matter of the suit to a tribunal would effectively amount to the same unless the constituent abandons the claim rather than carry it to the tribunal.
Though the bank in the present case insists that the ABS Marine decision should prompt a civil court to stay the constituent's action before it if it is found 26 to be inextricably connected with the bank's claim in the tribunal and leave the constituent free to pursue a counter-claim, the judgment in ABS Marine in its interpretation of Abhijit Tea says quite the opposite. At paragraph 25 of the report in ABS Marine the second condition is that both the bank and the constituent should agree that the constituent's independent suit should be taken up by way of a counter-claim in the bank's application before a tribunal. There are two aspects to this second condition. The first is the concurrence of the bank to obviate a subsequent stand to be taken by the bank before the tribunal under sub-section (11) of Section 19 of the 1993 Act that the counter-claim should be delinked from the claim. The second, and more important, rationale is the right of choice of the constituent; the civil court which has an obligation to entertain a claim would respect the constituent's choice to continue the constituent's action before it unless the constituent agrees to take it to the tribunal.
The plaintiff next refers to a judgment reported at (2009) 8 SCC 646 (Nahar Industrial Enterprises Ltd v. Hongkong and Shanghai Banking Corpn.). The plaintiff contends that, at the very least, an application of the present nature should not succeed in view of the Supreme Court dictum. Several paragraphs of the report have been placed. The core question that was addressed in Nahar Industrial was whether a High Court has the power to transfer a suit pending in a civil court situate in one State to a Debts Recovery Tribunal situated in another State. The appellant before the Supreme Court had instituted a civil suit in Ludhiana seeking a declaration that certain foreign exchange derivative contracts entered into with the respondent bank were void. An interlocutory injunction was also obtained in such proceedings. The bank lodged a subsequent claim under Section 19 of the 1993 Act with a Debts Recovery Tribunal in Mumbai. The bank then applied to the High Court of Punjab and Haryana seeking transfer of the suit pending in Ludhiana to the appropriate tribunal in Mumbai, which was allowed. Several legal questions were raised by the Supreme Court at paragraph 14 of the report.27
"14. In the background of these facts, the following questions that arise for our consideration are:
(I) Whether the High Court/Supreme Court has the power to transfer a suit from a civil court to DRT, keeping in mind,
(a) The effect of a transfer from the civil court to DRT is to oust the jurisdiction of the civil court which cannot be done without express statutory provisions.
(b) Proceedings before DRT is sui generis and totally different from the procedure in a civil court.
(c) Power of transfer under CPC (Sections 22, 23, 24 and 25) is inapplicable as these sections apply in a case where the transfer is from one court to another and DRT being not a court.
(d) The power to transfer under the DRT Act is restricted to cases filed by banks that were pending on the date when the Act came into force and in respect of those cases in which DRT has jurisdiction.
(II) Whether the decision of this Court in Indian Bank v. ABS Marine Products (P) Ltd. is applicable in the case of transfer of a suit from the civil court to DRT to be tried as a counterclaim, and could coordinate two-Judge Bench in SBI v. Ranjan Chemicals Ltd. have departed from the ratio thereof after noticing it and without referring the matter to a larger Bench of three Judges?
(III) Even if the power to transfer exists, in the facts and circumstances of the case, whether it ought to have been exercised.
(IV) Whether Article 142 is applicable to direct a transfer from a civil court to DRT, especially when:
(i) The DRT Act does not bar the jurisdiction of the civil court to entertain a suit against a bank and therefore powers under Article 142 ought not to be exercised to have such an effect.
(ii) Article 142 is not applicable where a statute occupies the field.
(iii) Power under Article 142 should be exercised only to prevent injustice and to do complete justice between the parties.
(V) Whether in the exercise of powers under Article 142, transfer of case ought to be refused to do complete justice between the parties and the proceedings before DRT be stayed pending disposal of the suit."28
The Court noticed the dicta in Abhijit Tea, ABS Marine and in SBI v. Ranjan Chemicals Ltd [(2007) 1 SCC 97]. It interpreted ABS Marine to have held that a transfer could be effected with consent but such question "was ignored in Ranjan Chemicals." In Nahar Industrial the court repelled an argument that either condition set in ABS Marine should result in a transfer and concluded that Ranjan Chemicals ought to have followed the opinion expressed in ABS Marine and could not have taken a contrary view. At paragraph 85 of the report, it was held that a constituent had no right to independently approach a tribunal under the 1993 Act as it had to wait for a bank to first lodge its claim in the tribunal; and, that the continuation of the constituent's counter-claim "is entirely dependent on the continuance of the application filed by the bank." It was also held that no declaratory relief could be sought from a tribunal by the constituent. Tribunals under the 1993 Act were found not to be civil courts or courts subordinate to the High Court in the hierarchy of courts. Paragraphs 96 to 98 of the report are instructive:
"96. The Tribunal was constituted with a specific purpose as is evident from its Statement of Objects. The Preamble of the Act also is a pointer to that too. We have also noticed the scheme of the Act. It has a limited jurisdiction. Under the Act, as it originally stood, it did not even have any power to entertain a claim of set-off or counterclaim. No independent proceedings can be initiated before it by a debtor.
"97. A debtor under the common law of contract as also in terms of the loan agreement may have an independent right. No forum has been created for endorsement of that right. Jurisdiction of a civil court as noticed hereinbefore is barred only in respect of the matters which strictly come within the purview of Section 17 thereof and not beyond the same. The civil court, therefore, will continue to have jurisdiction.
"98. Even in respect of set-off or counterclaim, having regard to the provisions of sub-sections (6) to (11) of Section 19 of the Act, it is evident:
(a) That the proceedings must be initiated by the bank.
(b) Some species of the remedy as provided therein would be available therefor.29
(c) In terms of sub-section (11) of Section 19, the bank or the financial institution is at liberty to send a borrower out of the forum.
(d) In terms of the provisions of the Act, thus, the claim of the borrower is excluded and not included.
(e) In the event the bank withdraws his claim the counterclaim would not survive which may be contrasted with Rule 6 of Order 8 of the Code.
(f) Sub-section (9) of Section 19 of the Act in relation thereto has a limited application.
(g) The claim petition by the bank or the financial institution must relate to a lending/borrowing transaction between a bank or the financial institution and the borrower.
(h) The banks or the financial institutions, thus, have a primacy in respect of the proceedings before the Tribunal.
(i) An order of injunction, attachment or appointment of a receiver can be initiated only at the instance of the bank or the financial institution.
We, however, do not mean to suggest that a Tribunal having a plenary power, even otherwise would not be entitled to pass an order of injunction or an interim order, although ordinarily expressly it had no statutory power in relation thereto.
(j) It can issue a certificate only for recovery of its dues. It cannot pass a decree.
(k) Although an appeal can be filed against the judgment of the Tribunal, pre-deposit to the extent of 75% of the demand is imperative in character.
(l) Even cross-examination of the witnesses need not be found to be necessary.
(m) Subject to compliance with the principle of natural justice it may evolve its own procedure.
(n) It is not bound by the procedure laid down under the Code. It may however be noticed in this regard that just because the Tribunal is not bound by the Code, it does not mean that it would not have jurisdiction to exercise powers of a court as contained in the Code. "Rather, the Tribunal can travel beyond the Code of Civil Procedure and the only 30 fetter that is put on its powers is to observe the principles of natural justice." (See Industrial Credit and Investment Corpn. of India Ltd. v. Grapco Industries Ltd.) The Tribunal, therefore, would not be a civil court."
The Supreme Court went on to add in Nahar Industrial that the jurisdiction of the civil court is barred under the 1993 Act only in relation to applications from banks and financial institutions for recovery of debts due to such banks and financial institutions. The Court found that the rights and liabilities of the parties had not been created under the Act, only a new forum was established.
The legal position as it now emerges is that the ambit of the 1993 Act is to be assessed from the statute and the exclusive jurisdiction of the tribunal thereunder is as to the matters covered by Sections 17 and 18 thereof. The tribunal does not have the plenary power to receive all civil actions pertaining to disputes between banks and their constituents. Suits filed in civil court by constituents cannot be directed to be transferred to the tribunal, though an issue involved in the suit may be decided as between the parties in the bank's application before the tribunal and, to such extent, operate as issue estoppel. In the context of an application for transfer of a constituent's suit to the tribunal, it is the law declared by the Supreme Court that even the High Courts and the Supreme Court in exercise of the powers of the Civil Procedure Code cannot transfer a civil suit other than the one contemplated under Section 31 of the 1993 Act to a Debts Recovery Tribunal. Surely, if the jurisdiction of the civil court in respect of the constituent's suit is not ousted by the 1993 Act, the authority of the civil court cannot be sought to be effectively curtailed by a sidewind as in a transfer application or by seeking stay of the constituent's suit upon the constituent being given liberty to carry the subject-matter thereof by a counter- claim to the bank's application to the tribunal.
31The bank says that the judgment rendered in Nahar Industrial is per incurium particularly its conclusion in clauses (c), (d) and (e) in paragraph 98 of the report. The bank has relied on a judgment reported at (1990) 3 SCC 682 (Punjab Land Development and Reclamation Corpn Ltd v. Presiding Officer) in support of such contention. This argument of the bank has to be taken up and scotched immediately. A decision is said to have been given per incurium when the court has acted in ignorance of a previous decision of its own or of a court of coordinate jurisdiction which covered the legal issue, or when it has acted in ignorance of a decision of a superior forum or a larger Bench of the same court. The contention of the bank here is that Nahar Industrial misread the authorities before it including the Delhi High Court Bar Assn judgment upholding the vires of the 1993 Act. Such an assertion cannot be countenanced. Any Supreme Court decision is binding on this Court. A Supreme Court decision which does not take into account a previous decision of a coordinate or a larger Bench may be said to be per incurium, but when the subsequent Supreme Court judgment notices and interprets the previous decisions, it cannot be said to have been rendered per incurium as it is not in ignorance of the previous authorities but upon consideration thereof.
It is the more fundamental aspect that the plaintiff has finally touched upon - that of the judiciary's exclusive authority in matters relating to adjudication. He refers to excerpts from the Constituent Assembly debates that preceded the making of the Constitution of India. On July 21, 1947, in discussing the matter of appointments to the provincial judiciary, Sardar Patel had emphasised that for the independence of the judiciary the appointment of High Court Judges should be such that it is "beyond any influence of the other parties and other influences and beyond any suspicion or doubt ..." On December 13, 1948, in the dialogue relating to the power of judicial review over legislative action, V.S. Sarwate commented that, "it is necessary in each case for the court to see whether the particular legislation meets exactly the requirements of the case, whether it does not exceed the requirements of the case. Getting 32 panicky a legislature may pass a legislation where it may not be necessary to have any such legislation." On what later became Article 32 of the Constitution, the debate on the same day emphasised that the right conferred thereby was "fundamental to all the fundamental rights guaranteed under this Constitution." On June 6, 1949, in course of the discussion on the jurisdiction of the Supreme Court as then proposed to be conferred by the Constitution, it was felt that not only should the Parliament not interfere with the Supreme Court, it should not exercise any power over Judges of the High Courts or Judges of the Supreme Court. Discussions held on June 7, 1949, November 23, 1949 and November 25, 1949 have also been placed by the plaintiff. The speech of Alladi Krishnaswami Ayyar has been placed wherein he emphasised on the high place conferred to the judiciary under the Constitution as "the complete independence of the court of justice is particularly essential to the proper working (of the Constitution ... and) the limitation of the different organs of the State can be preserved in no other way than through the medium of courts (which are) the balance-wheel of the Constitution." He also stressed on the need for judicial independence "both for safeguarding of individual liberty and the proper working of the Constitution"
while cautioning that the "doctrine of independence is not to be raised to the level of a dogma so as to enable the judiciary to function as a kind of super-legislature or super-executive." On the separation of powers which was then under draft Article 39A and later became Article 50 of the Constitution and directed the State to take steps to separate the judiciary from the executive in the public services of the State, Pandit Nehru said that the government was "entirely in favour of the separation of judicial and executive functions" and that even a period of three years for bringing about such separation was felt to be too long.
The plaintiff has stressed on the Constitutional mandate of the independence of the judiciary and says that the present application by the bank is to virtually emasculate the civil court in matters relating to a banker- constituent dispute carried by a constituent though the 1993 Act does not specifically provide for it.33
The plaintiff has relied on several judgments to emphasise on the independence of the judiciary. In the judgment reported at (1967) 1 SCR 77 (Chandra Mohan v. State of U.P.), a Constitution Bench observed that though the Constitution does not adopt the strict doctrine of separation of powers, yet it provides for an independent judiciary, "it constitutes a High Court for each States, prescribes the institutional conditions of service of the Judges thereof, confers extensive jurisdiction on it to issue writs to keep all tribunals, including in appropriate cases the governments, within bounds ..." In the judgment reported at (1996) 2 SCC 226 (K.R. Laxmanan (Dr.) v. State of T.M.), the Supreme Court held that notwithstanding a declaration by the legislature that a statute had been made to implement the Directive Principles specified in Article 39, it would be open to a constitutional court to ignore such a declaration in a given case and examine the validity of the Act. In the judgment reported at (1981) 2 SCC 362 (Waman Rao v. Union of India), another Constitution Bench while considering Article 13(2) of the Constitution referred to the doctrine of stare decicis and its history on the basis of common law. In the decision reported at (1997) 3 SCC 261 (L.Chandra Kumar v. Union of India), a Bench of seven judges reiterated that the power of judicial review was a basic and essential feature of the Constitution and observed that judicial review in India comprises three aspects: of legislative action, of judicial decisions and of administrative actions.
The Bench summarised that it is the superior courts in the country that have to ensure that the balance of power envisaged by the Constitution is maintained and that the legislature and the executive do not, in the discharge of their functions, transgress constitutional limits; and that judicial decisions rendered by subordinate courts and tribunals do not fall foul of the strict standards of legal correctness and judicial independence. The Court traced the primary origin of the power of judicial review to the enunciation of the principle in Marbury v. Madison [2 L.Ed. 60 (1803)].
34The plaintiff also relies on the minority view of the then Chief Justice of India in the Constitutional Bench judgment reported at 1991 Supp (1) SCC 600 (Delhi Transport Corpn v. DTC Mazdoor Congress) where, in the context of Article 141 of the Constitution under which the Supreme Court declares the law, he referred to "the childish fiction" that law is not made by the judiciary but it merely finds it.
The plaintiff has placed a recent judgment of the Supreme Court delivered on July 23, 2010 in Civil Appeal No. 5896 of 2010 (Shalini Shyam Shetty v. Rajendra Shankar Patil) where the principles guiding a High Court in exercise of its jurisdiction under Article 227 of the Constitution have been reiterated. The authority under Article 227 has been regarded as a "reserve and exceptional power of judicial intervention ... for promotion of public confidence in the administration of justice in the larger public interest ..." and it has been observed that not only can the High Court's power of superintendence under Article 227 not be curtailed by any statute, its "abridgement by a constitutional amendment is also very doubtful." The plaintiff says that the bank's effort in the present case to obliquely suggest that the authority of the civil court to receive a constituent's grievance against a bank has been denuded by the 1993 Act is an affront to the judiciary.
Finally, the plaintiff has fairly placed another recent judgment of a Constitution Bench rendered on May 11, 2010 in Civil Appeal No. 3067 of 2004 (Union of India v. R. Gandhi, President, Madras Bar Association) with Civil Appeal No. 3717 of 2005 (Madras Bar Association v. Union of India) on the creation of the National Company Law Tribunal and the National Company Law Appellate Tribunal and vesting in them the powers and jurisdiction exercised by High Courts in respect of company matters. The argument challenging the transfer of authority from High Courts to the tribunal was on the ground that it is in breach of the basic principles of the rule of law, separation of powers and independence of the judiciary. One of the questions that arose was as to whether there was any 35 demarcating line for the Parliament to vest intrinsic judicial functions traditionally performed by courts to any tribunal or authority outside the judiciary. The Court noticed that independence of the judiciary has always been regarded as part of the basic structure of the Constitution and though there was no strict separation of powers in the Constitution, judicial power in the sense of judicial power of the State was vested in the judiciary. At paragraphs 32 and 33 of the judgment it was held:
"32. The Constitution contemplates judicial power being exercised by both courts and Tribunals. Except the powers and jurisdictions vested in superior courts by the Constitution, powers and jurisdiction of courts are controlled and regulated by Legislative enactments. High Courts are vested with the jurisdiction to entertain and hear appeals, revisions and references in pursuance of provisions contained in several specific legislative enactments. If jurisdiction of High Courts can be created by providing for appeals, revisions and references to be heard by the High Courts, jurisdiction can also be taken away by deleting the provisions for appeals, revisions or references. It also follows that the legislature has the power to create Tribunals with reference to specific enactments and confer jurisdiction on them to decide disputes in regard to matters arising from such special enactments. Therefore it cannot be said that legislature has no power to transfer judicial functions traditionally performed by courts to Tribunals.
"33. The argument that there cannot be 'whole-sale transfer of powers' is misconceived. It is nobody's case that the entire functioning of courts in the country is transferred to Tribunals. The competence of the Parliament to make a law creating Tribunals to deal with disputes arising under or relating to a particular statute or statutes cannot be disputed. When a Tribunal is constituted under the Companies Act, empowered to deal with disputes arising under the said Act and the statute substitutes the word 'Tribunal' in place of 'High Court' necessarily there will be 'whole-sale transfer' of company law matters to the Tribunals. It is an inevitable consequence of creation of Tribunal, for such disputes, and will no way affect the validity of the law creating the Tribunal."
The bank's request here is for stay of the suit or, in the alternative, for transfer thereof to the appropriate Debts Recovery Tribunal. There is no question of any transfer in view of the Supreme Court decision in Nahar Industrial and the fact that there is no authority in law for the transfer of any proceedings to the 36 tribunal otherwise than as contemplated by Section 31 of the 1993 Act. The bank has not invoked any special jurisdiction of this Court as a High Court to transfer the matter, assuming for the moment that a High Court would have such power. Apart from the judgment in Nahar Industrial which observed that there was no such power to transfer conferred on a High Court, a civil court would certainly have no power to transfer a suit to the tribunal and, even if it did, the tribunal would be well within its authority not to accept such transfer. In any event, ABS Marine lays down that a transfer (in the sense of liberty being given to the constituent to carry the counter-claim to the tribunal) would be impermissible unless both the bank and the constituent agreed to it.
There are several anomalies in the 1993 Act and it would be naïve to accept the bank's contention that the Act be rewritten by court by invoking the principle of casus omissus. Indeed, the 1993 Act is a classic example of laboured amendment that goes against the grain and fundamental purpose of the statute. Neither the doctrine of casus omissus nor the rule as to the implied power to perform the incidental can be resorted to for protecting or safeguarding the interest of a constituent conferred by the Act. The wording of the relevant provision in Section 19 of the 1993 Act would not admit of a construction or interpretation that a constituent would have an independent right to lodge a claim against a bank or financial institution even if such claim were founded on the banker-constituent relationship between the parties. A constituent has per force to wait for a bank or a financial institution to apply under Section 19 of the Act before the constituent's right accrues to lodge a counter-claim. That, by itself, is anathema to the cardinal principle in civil law which permits either party to a transaction to carry a claim to court, whether or not such claim is in defence or offence. Again, the 1993 Act does not permit a defendant to a claim by a bank or financial institution to seek an interlocutory order in furtherance of its counter- claim lodged before the tribunal. Nahar Industrial says that the life of the constituent's counter-claim is co-terminus with the application filed by a bank or a financial institution and cannot outlive the original application. The decree or 37 certificate that is issued upon the completion of an adjudication of a claim by the tribunal under the 1993 Act does not envision that it could be the constituent who may, even in the rarest case, be entitled to receive payment from the bank or financial institution. To mend these obvious lacunae in the Act would be beyond the authority of a court in the constitutional scheme of things and would amount to usurping the jurisdiction of the appropriate legislature. To interpret the 1993 Act and provide for apposite remedies for a constituent would not be ironing out the creases, but would result in engrafting a new law and way beyond judicial authority. The doctrine of casus omissus would allow the smoothening of rough edges and not the chiseling of a new sculpture.
If there is no adequate remedy available before a tribunal to a constituent, the civil court can scarcely shoo away a constituent who has carried an action before it on the ground that the subject-matter of the action is inextricably linked to the claim by a bank or financial institution launched before a tribunal under the 1993 Act. The civil court has to leave it to the volition of the constituent to carry his claim to the tribunal and expose himself to the vagaries of the 1993 Act.
In a different way, the more deep-rooted objection of the plaintiff is in the whittling down of judicial authority in even entertaining an application of the present nature to rob a claimant of his right to approach a civil court for a perceived civil wrong. The anguish of this plaintiff has to be understood as a protest to the outsourcing of the core judicial function to a body that is not within the institution that goes by the name of judiciary. The underlying submission of the plaintiff is that the duty of adjudication is the domain of the judiciary and it is inviolable under the Constitution; being even more fundamentally ingrained than the basic structure of the Constitution. The argument, however, cannot be noticed in view of the specific finding in the still unreported judgment of R. Gandhi that the legislature has the "power to transfer judicial functions traditionally performed by courts to Tribunals."
38Article 16 of the Declaration of the Rights of Man and of the Citizen announces that "a society in which the observance of law is not assured, nor the separation of powers defined, has no constitution at all." There is no rigid separation of powers under the Constitution of India, but there is sufficient indication as to the primary functions of the three organs of the State. There is substance in what the plaintiff says when it urges that the core activities of the three separate wings cannot be abrogated or taken away by another: legislating would be the central area of operation of the legislature; administration would be within the theatre of activities of the executive; and, adjudication will be the primary function of the judiciary. The plaintiff's submission here is noted without any comment, since it is established by binding authorities that the extent of adjudication by the judiciary can be curbed by the legislature, subject to the process of adjudication placed elsewhere being amenable to judicial review. The plaintiff suggests that if judicial review is seen to be a watchdog to oversee the decision-making process and not the decision itself, when traditional judicial functions are taken away from the judiciary it may not always be an adequate safeguard.
The independence of the judiciary, which is recognised as a basic structure of the Constitution, has two facets: institutional independence and functional independence. Institutional independence would preclude overlapping membership, an extent of freedom in the matter of appointment and continuation in office and the like. Functional independence would relate to the authority of the institution to exercise the function for which it is designed. In a sense, the doctrine of separation of powers, however flexible, would include both institutional separation and functional separation which are not mutually exclusive. But any form of separation of powers would fundamentally incorporate an extent of either kind of independence. That the core function of the judiciary would be to adjudicate is a given in the Constitution; it is a fundamental constitutional assumption so rudimentary that it may have been felt to be too obvious to have been spelled out in as many words.
39There is an element of uncertainty about both the desired extent of separation and the constitutionally ordained measure thereof. In the modern form of constitutional governance there does not appear to be any complete or absolute form of separation. There is an extent of law-making - whether by delegated legislation or in course of an Emergency - that the executive enjoys, just as it traditionally exercises a degree of quasi-judicial authority. Similarly, the legislature has an element of administrative function and a substantial degree of judicial authority in respect of specified matters. The judiciary has its administrative side and the rule-making power incidental to its administration. But, by and large, the ancillary duties and functions that appear to be of the kind traditionally exercised by another wing of State is in furtherance of the core function of that wing. There may yet be some further overlapping that is a departure from the rigidity propounded by Montesquieu for maintaining "checks and balances." The underlying argument of the plaintiff echoes the thought expressed by James Madison that "the accumulation of all powers, legislative, executive and judiciary, in the same hands, whether of one, a few, or many, and whether hereditary, self-appointed or elective, may justly be pronounced the very definition of tyranny."
Since the bank's application is bound to fail as there is no authority in law to transfer this suit to any Debts Recovery Tribunal unless the plaintiff withdraws the action and carries his claim to the tribunal that the bank has approached, nothing further needs to be said on the other aspect of the matter that the plaintiff has canvassed. As a footnote, it may only be remembered that the triple hats of the Lord Chancellor in England and the dual functions of the House of Lords are out of fashion this summer; and that even William Blackstone had embraced Montesquieu and Locke to make a case for a "distinct and separate existence of the judicial power in a peculiar body of men ... separated from both the legislative and the executive power."
GA No. 2555 of 2010 fails. There will be no order as to costs.
40Urgent certified photocopies of this judgment, if applied for, be supplied to the parties subject to compliance with all requisite formalities.
(Sanjib Banerjee, J.)