Allahabad High Court
Mudit Entertainment Industries (P.) ... vs Banaras State Bank Ltd. And Others on 23 September, 1999
Equivalent citations: 2000(2)AWC1008, (2000)1UPLBEC25, AIR 2000 ALLAHABAD 181, 2000 ALL. L. J. 1378, 2000 A I H C 3496, 2000 (2) BANKCLR 210, 2000 (2) ALL WC 1008, 2000 (2) BANKCAS 578, 2001 BANKJ 543, 2000 (1) UPLBEC 25
Author: Onkareshwar Bhatt
Bench: Onkareshwar Bhatt
JUDGMENT Ashok A. Desai, J.
1. This bunch of petitions have questioned legislative competence of the Parliament to enact the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (hereinafter referred to "the Act, 1993") and legality of consequent transferring of recovery suits to the Tribunal constituted thereunder, as well Notification dated 7.4.1988 establishing the Tribunal at Jabalpur for Uttar Pradesh and Madhya Pradesh. These petitions, since raise common questions of facts, and law, are heard together and being disposed of by this common Judgment.
2. The Act of 1993 has established Tribunal for expeditious recovery of debts due to Banks and Financial Institutions. According to the learned counsel for petitioners, 42nd Constitutional Amendment of 1976 has now incorporated Part XIVA to the Constitution. This part contains Articles 323A and B. Article 323B empowers the Appropriate Legislature, by law to provide Tribunals for adjudication and trial, on the subjects enumerated therein. The Amendment of 1976, therefore, by necessary implication brings limitation on the plenary jurisdiction of the Parliament, to establish Tribunal on the subject, which have been, excluded under Article 323B. Submission of the learned counsel, therefore, is that the Parliament now cannot establish the Tribunal as it has been done under the impugned Act, by resorting to plenary jurisdiction under Article 245 of the Constitution. Consequently, the Parliament has traversed beyond the legislative competence, by establishing the Tribunal.
3. Clause 4 incorporates non obstante clause to Article 323B which reads thus :
"Clause (4).--The provisions of this article shall have effect notwithstanding anything in any other provision of the Constitution or in any other law for the time being in force."
Similar is the provision to Article 323A. Provisions under both the Articles have overriding effect on all the provisions of the Constitution including Article 245. Further submission, therefore, is it is no more open for the Parliament to establish any Tribunal, in exercise of plenary jurisdiction. To constitute a Tribunal on any other subject, the Parliament has to suitably amend Article 323B, by inserting the particular subject.
4. The non obstante clause gives overriding effect to the provision under the said Article. It is, therefore, explicit that the provisions existing prior to the Amendment of 1976 shall in no manner affect or control the operation of the added provisions. The non obstante clause certainly takes the provision to which it is attached at the highest pedestal than the other provisions prevailing at the relevant time. However, the clause has no gimmick or mission to bring shrinkage or control upon the existing provision including Article 245. True it is that the Parliament could not take resort to Article 323B to establish Tribunal on the subjects other than those mentioned therein in absence of suitable amendment. The Parliament, however, was not prevented to exercise power under Article 245 read with Entry 46 coupled with 11A. of III list of VII Schedule to establish the Tribunal, as provided under the Act 1993. For constituting such Tribunal, the Parliament was not obliged to amend Article 323B.
5. Similar was the question in Delhi High Court Bar Association v. Union of India, AIR 1995 Del 232. In paragraph 44 of the report, the Court has observed that Article 323A or B does not create bar in constituting Tribunal beyond these Articles. It is added Article 323B confers discretion on the Parliament to legislate in the matter to exclude jurisdiction of the Courts including High Court. The Punjab and Haryana High Court in a Judgment delivered on 11th September, 1996 in Civil Misc. Writ Petition No. 12901 of 1996, M/s. Kundan Rice and General Mills v. Union of India and others, referring to Articles 323A and B has held that the plenary power of the Parliament to legislate under the Constitution has not been curtailed.
6. Entry No. 11A has been incorporated in List III by 42nd Amendment of 1976 which relates to the Administration of Justice and constitution and organisation of Courts. The Tribunal, as established for the recovery of debts under the impugned Act, the submission is, has nothing to do with the Administration of Justice. The statement of object and reason also does not make any reference thereto. The Parliament, therefore, cannot press into service Entry No. 11A to establish the Tribunal. Submission is not well-founded.
Statement of Object and Reason (as extracted from the judgment in United Bonk of India v. Debts Recovery Tribunal and others, (1999) 4 SCC 69 paragraph 5) is thus :
"Banks and financial Institutions at present experience considerable difficulties in recovering loans and enforcement of securities charged with them. The existing procedure for recovery of debts due to the banks and financial institutions has blocked a significant portion of their funds in unproductive assets, the value of which deteriorates with the passage of time. An urgent need was, therefore, felt to work out a suitable mechanism through which the dues to the banks and financial institutions could be realised without delay. The Bill seeks to provide for the establishment of Tribunals and Appellate Tribunals for expeditious adjudication and recovery of debts due to Banks and Financial Institutions. Notes on clauses explains in detail the provisions of the Bill."
7. "Administration of Justice" is a term of very wide amplitude and connotation. The same cannot be marginalised only to organising Courts. Establishing or organising Court have been one of the incidents of the Administration of Justice. Now it is a long standing to experience that litigation in a civil court for recovery of debts has a considerable durability, its effect on public funds has been devastating. To provide speedy and simple remedy is certainly a facet of Administration of Justice. The statement, no doubt in clear terms has not used the phraseology of Administration of Justice, but intendment of the impugned Act, 1993, clearly attempts to accomplish it.
8. The learned counsel for the petitioners then tried to contend that Entry No. 11A if empowers the Parliament in its plenary jurisdiction to constitute the Tribunal, the incorporation of Articles 323A and B would become superfluous. This submission is devoid of substance.
Articles 323A and B inter alia provide for exclusion of the jurisdiction of all Courts including the High Court under Articles 226 and 227 of the Constitution of India over the Tribunal so constituted. The Parliament, however, under its plenary jurisdiction can legislate on Entry No. 46 read with Entry No. 11A to constitute Tribunal, which has to be subject to the jurisdiction of the High Court.
9. Vehemently it is urged that the Scheme under the Act of 1993 is completely defective and unworkable. By making reference to Section 17 of the Act, argument advanced is that Tribunal has authority to entertain the application for recovery of "debts" as defined, to Banks or Financial Institutions. As such, any claim for "set off" or "counter-claim" put forth by the debtor cannot be adjudicated under the Scheme of the Act. To support, attention is invited to paragraph 48 of judgment in AIR 1995 Del 323 (supra). It is recorded, "According to Mr. Chandrasekharan, learned Additional Solicitor-General, the claim of adjustment, set off or counter-claim would be good as a defence to knock down the claim of the Bank. But then to what effect? If the Tribunal cannot award the counter-claim or other amounts found due to the respondent, it certainly cannot adjudicate upon that, which would mean that all such defences would be barred." We do not find ourselves in agreement with a view thus expressed by the learned Judges.
10. The Act of 1993 came into being to provide a forum for recovery of debts due to the Bank and Financial Institutions. The Tribunal, therefore, cannot pass the order to effect recovery from the Bank in case the counter-claim is of the amount more than the debt. However, this does not convey that any counterclaim or set off could not be adjudicated by the Tribunal to nonsuit the Bank.
Sub-section (4) of Section 19 further casts obligation to pass such order so as to meet the ends of Justice, In terms of Section 22, the Tribunal is not obliged to adhere to the provisions under the Code of Civil Procedure, but it has to guide itself by the Principles of Natural Justice. Subsection (3) of Section 22 declares that the proceedings before the Tribunal are of judicial character and the Tribunal shall be deemed to be a civil court for the purpose indicated therein.
11. Section 2(g) defines :
"debt" means any liability (inclusive of interest) which is alleged as due from any person by a bank or a financial institution or by a consortium of banks or financial Institutions during the course of any business activity undertaken by the bank or the financial institution or the consortium under any law for the time being in force, in cash or otherwise, whether secured or unsecured, or whether payable under a decree or order of any civil court, or otherwise and subsisting on, and legally recoverable on, the date of the application."
Clear it is that the debtor is liable to pay to the Bank only that amount which is due and legally recoverable.
Sub-section (3) of Section 19 requires the Tribunal to issue show cause notice to the debtor as to why relief prayed for should not be granted. For the debtor. It is open to resist the claim putting forth a cause to defeat the claim of the Bank. Section 17 confers the jurisdiction on the Tribunal, which reads thus :
"A Tribunal shall exercise, on and from the appointed day, the Jurisdiction, powers and authority to entertain and decide applications from the banks and financial institutions for recovery of debts due to such banks and financial institutions."
12. The Tribunal is not merely an Executing Authority to recover debts as claimed by the Bank or Financial Institutions. The Tribunal is enjoined with the duty to decide the debts due to the Bank. Taking into account the entire scheme and modalities, the Tribunal, while adjudicating the claim of the Banks or the Financial Institutions, has to take into account the cause shown by the debtor as required under sub-section (3) of Section 19. Such cause could include the counter-claim and set off of the debtor as put forth against the claim of the Bank. The Tribunal, having regard to the cause as shown, has to decide the liability of the debtor and if the debtor succeeds, the Tribunal has to make necessary adjustment of such claim against the debts claimed by the Bank. The grievance as such is untenable.
13. Next contention of the petitioners is that sub-section (4) of Section 1 of the Act of 1993 refers to the debt, which is not less than ten lac. There is no basis for fixing particular amount. Intendment of the Legislature is to provide speedy remedy of recovery, then even the debts less than 10 lac could also be included. Debtor of amount less than 10 lac. In a civil proceeding can claim decree of counter-claim against the Bank. However, the debtor of more than 10 lac is deprived of the same before the Tribunal. Provisions are, therefore, arbitrary and discriminatory. This challenge on behalf of the debtors-petitioners is totally unsustainable.
The Act 1993 has been introduced as seen from the statement to provide speedy remedy for recovery of debts, since there has been considerable difficulties experienced therefor. The Legislature, therefore. In its wisdom thought it expedient to confine this special remedy for recovery of debts of more than ten lac. For lesser amount, the Bank and Financial Institutions can avail normal remedy of civil court. The demarcation, thus made could not be termed to be arbitrary. Besides this, said provisions further authorise the Central Government to specify such other amount, which shall not be less than one lac rupees. Having regard to the contingency, debts less than ten lac but more than one lac can also be included within the purview of the Tribunal.
14. The petitioners thereafter contended that provision under Section 2(h) defining "Financial Institutions' is ungulded and provides wide discretion to the Government to include any or every institute. Submission is also not well founded. Section 2(h) reads thus :
(h) "financial Institution" means--
(i) a public financial institution within the meaning of Section 4A of the Companies Act, 1956;
(ii) such other institution as the Central Government may, having regard to its business activity and the area of its operation in India, by notification, specify ;
Clause (i) Includes Financial Institution of definite description. No doubt, clause (ii) refers to such other Institutions to be notified by the Government. However, on reading this provision under sub-clause (ii) it is clear that the guidance is provided under the clause itself. It is not the free will of the Government to include any or every institute. The Government can notify only such other institutions having regard to their business activity and area of its operation.
15. Section 3 of the Act of 1993 deals with the establishment of "Tribunal". Sub-section (2) thereof authorises the Central Government to notify the area within which the Tribunal may exercise the Jurisdiction. The grievance is that the provisions have conferred unguided and unfettered power on the Central Government. In exercise thereof, the Government of India issued impugned notification dated 7.4.1998 establishing a Tribunal at Jabalpur having a territorial jurisdiction of Madhya Pradesh and Uttar Pradesh. This has created serious hardships. Practically it is difficult for the people of northern part of Uttar Pradesh to attend the sitting of the Tribunal at Jabalpur.
The Tribunal has been set up as a special forum by way of special remedy. Though it might be desirable, it could not be practicable to set up such a special forum in the vicinity of every town or region. The Government may consider these aspects and arrange sitting for the Tribunal at various places. However, the ground as raised cannot be pressed into, to question the validity of the notification.
Our attention is invited to page 42 of the paper-book where the learned Solicitor-General before the Supreme Court made a statement that the Government is considering to carry certain amendments in the Act and Regulation. Further statement has been made by the learned standing counsel for the Union of India that the Government of India has decided to set up a Tribunal at Allahabad and Ministry of Finance issued advertisement for filling the posts of Presiding Officers of the Tribunal. In view of this, the grievance does not subsist.
The challenges In the petitions are without any merit. They are, therefore, dismissed. Interim orders stand vacated.