Karnataka High Court
R. Gopalakrishna S/O Late Sri N.S. ... vs The Karnataka State Financial ... on 22 January, 2008
Equivalent citations: AIR2008KANT77, ILR2008KAR2034, (2008) 5 KANT LJ 327, AIR 2008 KARNATAKA 77, 2008 (2) AIR KANT HCR 547, 2008 A I H C 2081, (2008) ILR (KANT) 2034, (2008) 2 BANKCLR 822
Bench: S.R. Bannurmath, Jawad Rahim
JUDGMENT R. Gopalakrishna, J.
1. This appeal is filed by the unsuccessful plaintiff challenging the judgment and decree dated 21-04-2002 passed by the learned XVI Addl. City Civil and Sessions Judge, Bangalore dismissing the suit In O.S. No. 2567/2000.
2. The facts necessary for consideration of the appeal are as follows:
The plaintiff/appellant has filed a suit in O.S. No. 2567/2000 praying for following reliefs:
(a) Declaring that the liability of the plaintiff as issued early by mortgage of the suit schedule property to as extinguished by operation of law;
(b) Consequential mandatory infunction directing the defendants to return the documents deposited as per the list dated 09-09-1995;
(c) Permanent Injunction restraining the defendants from proceeding against the suit schedule property as a property mortgaged to discharge the debt due from M/s Sriram Borewells, Tarikere.
(d) to award costs;
(e) grant such other reliefs as deemed just and necessary In the facts and circumstances of the case.
3. As per the plaintiff, the dispute between the plaintiff and the defendants arose In the following manner:
M/s Srlram Borewells, Tarikere, which was owned by one Mr. Muthu, applied for loan of Rs. 24,00,000/- with Karnataka State Finance Corporation, Chlckmagalur Branch, Hosamane Extension Road, Chlckmagalur and the loan to the tune of Rs. 24,95,000/- was sanctioned on 30-08-1995 for the purchase of new borewell machine mounted on lorry. The KSFC paid money to the Company, which supplied the rig on hypothecation. As the said Srirama Borewell was called upon to get collateral security, It Is alleged that plaintiff who knew him agreed to stand as guarantor by way of security of the suit schedule property to be treated as collateral security.
4. It appears that there was failure on the part of M/s Srirama Borewell to pay the Installments and discharge the loan. As such the KSFC Issued public notice In the newspapers In this regard recalling the entire loan and notifying that under Section 29 of the KSFC Act, the vehicle would be seized on 'as is where is' basis. This was also communicated to the parties Including the plaintiff.
5. It also appears the that one Mr. Ravi, GPA holder of Mr. Muthu and Smt. Rathnamma, W/o Ashok Reddy, who is proprietor of M/s ACM Borewetls entered Into sale agreement on 24-08-1997 and requested the defendant No. 2 - KSFC to transfer the vehicle along with the loan liability to M/s ACM Borewelts. The Project Manager of defendant No. 2 consented for the same and necessary transfer deed was drawn. In this regard the said Smt. Ratnamma, gave collateral security, which was accepted by the defendant No. 2 end a sale deed was also executed on 24-12-1997. After this transaction the defendants recognised Smt. Rathnamma and Ashok Reddy, her husband, as purchasers of the vehicle and liable to discharge the loan. It appears the vehicle was later transported to Madhya Pradesh.
6. Having consented for the sale of rig and accepted the ownership of Smt. Rathnamma and her husband after the sale, the defendants Initiated recovery proceedings against the plaintiff and the purchasers, as the entire loan was not wiped out.
7. It Is at that stage the present suit came to be filed for the aforesaid reliefs, on the ground that the liability of the plaintiff as surety stood discharged by the acts and omissions of the defendants, namely,
(a) failure to seize the vehicle under Section 29 of the KSFC Act;
(b) Transfer of the hypothicated vehicle by the loanee In favour of Smt. Ratnamma, the subsequent owner with the consent of the defendants;
(c) the Act of silence or non-action on the part of the defendants even after coming to know that the hypothlcated vehicle Is removed out of Karnataka jurisdiction and taken to Madhya Pradesh; and
(d) Consent for transferring the hypothlcated vehicle in favour of Anjaneya Reddy, In pursuance of the agreement entered Into between Smt. Rathnamma and Mr. Anjaneya Reddy, without consent of the plaintiff.
8. This suit came to be resisted by the defendants on various grounds. It Is not necessary to elaborately deal with the pleadings or written statement of the defendants, since the trial court has not gone Into the merits of the case and has dismissed the suit on the short question of maintainability of the suit.
9. After hearing both the learned Counsel and on going through the Impugned judgment and decree, at the outset It Is to be noted that the procedure adopted by the trial court is totally Illegal and contrary to the provisions of the Code of Civil Procedure, 1908.
10. It Is to be noted that after framing of the issues the trial court Is required to record the evidence and thereafter proceed to give Its judgement. In the present case, there Is no dispute that even before recording of the evidence of both sides the trial court while considering the Interlocutory application filed by the plaintiff for temporary Injunction, straight away proceeded with the final arguments and held the suit as not maintainable and dismissed the suit.
11. The law requires that after framing of issues as per Order XVI to XIX of CPC, the Court is required to record the evidence and then proceed for hearing of the suit and pronounce the judgement as per Order XX of CPC. The trial court In our view was in error in pronouncing the judgement without recording the evidence.
12. Even after the question of maintainability was raised by the defendant and issue was framed in this regard at the best the trial court should have heard only on the question of maintainability and then depending upon its pronouncement whether the suit Is maintainable or not proceeded further under Order XIV Rule 2 of CPC. Not following this well settled and mandatory procedure, In our view renders the entire judgement as Illegal and liable to be set aside.
13. However, In order to see whether the conclusion of the trial court regarding maintainability Is also just and proper or not, we have heard the both the learned Counsel In this regard. It Is to be noted that the trial court In this regard has framed the Issue No. 4, which Is as follows:
Whether the defendants proves that the suit of the plaintiffs is not maintainable in view of their contention at Para No. 18 of the written statement?
14. According to the learned trial judge by cogent and combined reading of provisions of Section 3 of Karnataka Public Money Recovery Dues Act, 1979, Section 61 of the Karnataka Land Revenue Act, 1964 and Sections 28 and 29 of the State Financial Corporation Act, 1951, It Is clear that where there are special statue empowering financial Institutions to recover loans advanced to Its borrowers and guarantors, the general Jurisdiction of the Civil Court under Section 9 of the Code of Civil Procedure, 1908, is either expressly or Implledly bar. Further, It Is held that as there is clear bar of the jurisdiction of the Civil Court and when the statute provide special provisions, the suit like one on the hand Is not maintainable.
15. The trial court further observed that under Section 34 of the Specific Relief Act, the declaratory relief could be sought only on the ground of fraud, misrepresentation, coercion, undue influence, etc., and since there is no pleading to that effect the present suit Is not maintainable.
16. On these findings, the trial court proceeded to dismiss the suit and hence the present appeal.
17. We have heard Sri. S.G. Bhat, learned Counsel for the appellant and Sri. Rudragowda, learned Counsel for the respondents and perused the records.
18. Drawing our attention to the provisions of Section 3 of the Karnataka Public Moneys (Recovery of Dues) Act, 1979, Section 91 of the Karnataka Land Revenue Act and Section 29 of the State Financial Corporation Act, It Is vehemently contended that In none of these provisions, there is a bar either expressly or impliedly for filing a suit of this nature. It Is contended that insplte of absence of such material, the trial Court has erroneously and Illegally held that as the liability of the borrower and the guarantor are joint and several and coextensive, the liability of the appellant (plaintiff - the guarantor) to the extent of offering the collateral security of the schedule property is not wiped-off as long as the debt is not charged and In terms of the provisions of the aforesaid mentioned Acts. It is also the trial Court finding that as there are special statutes empowering the financial Institutions to recover the loans advanced by it to the borrowers and the guarantors, the general jurisdiction of the civil courts under Section 9 of CPC is expressly barred. It is submitted that as Is well settled, the jurisdiction of the civil Courts to entertain suits under Section 9 CPC, normally cannot be taken away unless there is specific bar under any statute. Sri. Bhat further contended that merely because there Is a special statute for mode of recovery of money, that by Itself will not close the doors of the aggrieved persons Invoking the jurisdiction of the civil Courts and hence, the conclusion of the trial Court that there is a bar under the statute and hence, the civil Courts cannot entertain the suit of present nature is Illegal. It Is also contended that the trial Court had committed procedural Illegality in deciding the case straight away after framing of Issues and directly proceeding to hear the arguments and pass the judgment and decree Impugned. As such, looking at the case from any angle, It Is contended that the Impugned judgment and decree is unsustainable In law.
19. On the other hand, Sri. Rudragowda, learned Counsel appearing for the respondents, referring to the various pronouncements of the Apex Court and this Court including (Mardia chemicals Ltd., etc. v. Union of India and Ors. etc.,), AIR 1007 SC 2070 (S.P. Subramanya Shetty and Ors. v. Karnataka State Road Transport Corporation and Ors.), AIR 1081 Karnataka 193 (M.A. Katnath and etc. v. Karnataka State Financial Corporation and etc.,) and 2006 AIR SCW 5001 (Industrial Investment Bank of India Ltd. v. Marshal's Power A Telecom (I) Ltd. and Anr.), vehemently contended that under the provisions of Karnataka Public Moneys (Recovery of Dues) Act, 1979, once there is certificate issued for recovery as arrears of land revenue, a suit Is not maintainable and If at all any person is aggrieved by the same, his remedy Is to challenge the same by way of writ petition Invoking the writ jurisdiction of this Court under Article 226 of the Constitution of India. Drawing our attention to the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and State Financial Corporation Act, 1951, it is contended that as under these special statutes, the law has provided effective and efficacious remedy to the persons like plaintiff, they have to seek the remedy under those provisions of the Act and not approach the civil Courts of the nature of the present suit. It Is alternatively contended that even if It Is held that the suit is maintainable, in view of the later developments viz., withdrawal of the certificate Issued earlier, which Is the subject and basis for the present suit and since the respondents have Initiated proceedings under Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, the remedy of the appellant Is to challenge the recovery proceedings before the Debt Recovery Tribunal and in view of the provisions of Section 17 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act read with Section 34 of the Debt Relief Act, the present suit has to be dismissed. On these among other grounds, it Is contended that looking at the case from any angle, the judgment and decree passed by the trial Court Is just and proper and the appeal needs no interference by this Court.
20. While narrating the facts, we have noted from the pleadings of the parties that the specific case of the plaintiff is that though he stood surety for the loan transaction between M/s Sriram Borewells, Tarikere and Karnataka State Finance Corporation - defendant No. 1 and the subsequent conduct of defendant No. 1 and borrower In entering the subsequent transactions In respect of the hypothecated vehicle viz., entering Into sale agreement and transfer of the vehicle out of the jurisdiction of Karnataka, his liability stood discharged and as such, he has prayed for the declaration that the liability of the plaintiff stood extinguished by operation of law or the conduct of the parties and consequential Injunction was perfectly within the purview of the civil Court. As we have noted earlier, the trial Court has basically adopted Illegal procedure In disposing of the suit Itself Immediately after framing Issues and without recording evidence as the Code of civil Procedure mandates that after framing of Issues, the Court has to record the evidence and then after hearing the arguments on both sides, proceed with the judgment. In the present case, for the reasons best known to the trial Judge, after framing of the Issues, even In the absence of considering the maintainability issue as preliminary issue, it has heard the arguments on both sides and proceeded to decide on all the issues, which is totally illegal and Impermissible under law. On this ground alone, the appeal has to be allowed. However, as the question regarding the maintainability of the suit is also Invoked and Is before us, we would like to deal with that aspect also.
21. It is to be noted that under Section 9 of CPC, the Civil Courts have jurisdiction to try suits of civil nature of all kinds except suits of which their cognizance is expressly or impliedly barred. This aspect of jurisdiction of the civil Courts is subject matter of various pronouncements. In the case of Dhulabhai v. State of Madhya Pradesh and Anr. , a Constitutional Bench of the Apex Court has considered in detail the scope and object of Section 9 of CPC and has laid down the following guidelines regarding exclusion of jurisdiction of the Civil Courts:
(1) Where the statute gives a finality to the orders of the special tribunals the civil courts jurisdiction must be held to be excluded if there is adequate remedy to do what the civil court would normally do in a suit Such provision, however, does not exclude those cases where the provisions of the particular Act have not been complied with or the statutory tribunal has not acted In conformity with the fundamental principles of judicial procedure.
(2) Where there Is an express bar of the jurisdiction of the court, an examination of the scheme of the particular Act to find the adequacy or the sufficiency of the remedies provided may be relevant but is not decisive to sustain the jurisdiction of the civil court. Where there is no express exclusion the examination of the remedies and the scheme of the particular Act to find out the intendment becomes necessary and the result of the inquiry may be decisive. In the latter case, It is necessary to see If the statute creates a special right or a liability and provides for the determination of the right or liability and further lays down that all questions about the said right and liability shall be determined by the tribunals so constituted, and whether remedies normally associated with actions in civil courts are prescribed by the said statute or not.
(3) Challenge to the provisions of the particular Act as ultra vires cannot be brought before Tribunals constituted under that Act. Even the High Court cannot go Into that question on a revision or reference from the decision of the Tribunals.
(4) When a provision Is already declared unconstitutional or the constitutionality of any provision is to be challenged, a suit Is open. A writ of certiorari may Include a direction for refund if the claim is clearly within the time prescribed by the Limitation Act but It Is not a compulsory remedy to replace a suit.
(5) Where the particular Act contains no machinery for refund of tax collected in excess of constitutional limits or Illegally collected, a suit lies.
(6) Questions of the correctness of the assessment apart from its constitutionality are for the decision of the authorities and a civil suit does not lie if the orders of the authorities are declared to be final or there Is an express prohibition in the particular Act. In either case the scheme of the particular Act must be examined because It Is a relevant enquiry.
(7) An exclusion of jurisdiction of the Civil Court is not readily to be inferred unless the conditions above set down apply.
22. It is to be noted that the Constitutional Bench emphasized that exclusion of jurisdiction of the civil courts should not be readily Inferred unless the conditions as laid down in the decision are fulfilled. This law laid down has been reiterated by the Apex Court in the later pronouncement in the case of State of Andhra Pradesh v. Manjeti Laxmi Kantha Rao(D) by LRs. and Ors. . From these decisions, It Is clear that the normal rule of law is that civil Courts have jurisdiction to try all suits of civil nature except those of which cognizance is either expressly or implledly excluded as provided under Section 9 of CPC. Such exclusion cannot be Inferred as a matter of course and in this regard, the courts are required to examine such question viz.,:
1) Whether the legislative Intent to exclude arises explicitly or by necessary implication;
2) Whether the statute in question provides for adequate and satisfactory alternative remedy to a person aggrieved by an order made under It;
3) Whether a statute gives finality to the orders of the specially created machinery.
23. Keeping In view these well settled principles, If one peruses the provisions of three Acts relied upon by the trial Court and the learned Counsel for the respondent, in our view, they do not either expressly or impliedly exclude the jurisdiction of the civil Courts.
24. The trial Court and the learned Counsel for the respondent have placed much reliance on Section 3 of the Karnataka Public Moneys (Recovery of Dues) Act, 1979 to contend that whenever certificates are Issued by the competent authority to recover the dues as arrears of land revenue, It Is deemed that any person aggrieved by such action, cannot file suit as It is implledly barred. In this regard, the learned Counsel has relied upon the pronouncements of the learned single Judge of this Court In the case of M.A. Kamath and etc. v. Karnataka State Financial Corporation and etc. reported in AIR 1981 Karnataka 193. We have looked into this decision in Its entirety. We do not see any finding of the learned single Judge as to the question of bar of civil Courts in. this regard. However, the learned Counsel for the respondents Intends to contend that as the learned single Judge of this Court in the aforesaid decision has held that writ petition Is maintainable, It is to be Inferred that the civil Courts jurisdiction Is barred. We are afraid to accept such contention. It Is to be noted In this regard Itself that a later decision of another learned single Judge in the case of Kataria J.H.M v. Collector of Bombay Recovery of Sales Tax and Anr. reported in 1983 (2) KLJ 518 Is directly contrary to what the learned Counsel is contending. In that decision, It has been specifically laid down that It Is open to a person challenging a revenue recovery certificate issued under Section 3 of the Act to file a civil case where the questions raised can be satisfactorily examined and decided and as such, the refusal of the Court to exercise jurisdiction under Article 226 is justified.
25. Apart from these conflicting views, If on(c) peruses Section 3 of the Karnataka Public Moneys (Recovery of Dues Act, 1979, It nowhere debars the jurisdiction of the civil court except Sub clause 5 of the Section. This sub-clause reads thus:
No suit for the recovery of any sum due aforesaid shall, lie in a civil court against any person referred to therein. If proceedings to recover the same are pending before the Deputy Commissioner.
26. By the emphasized words, it Is clear that no doubt under Section 3, there is some bar created for suit. But that bar Is very specific. By harmonious construction of Section 3 especially Sub-clause 5, It is dear that when suits against any person I.e. borrower In respect of the debt, cannot be filed for the recovery. This bar, in our view, Is against the creditor and not against the borrower.
27. It is well settled law by this Court as well as the Apex Court, considering the creation of Special Tribunals like one under the Karnataka Land Reforms Act and the Karnataka Land Acquisition Act, the jurisdiction of the Civil Courts gets bar only If the special statute provides for adequate and satisfactory alternate remedy to a party aggrieved by the order made under that provision. In the present case, by reading the pleadings of the parties especially the plaint, the plaintiff Is claiming the declaratory relief and consequential Injunction on the ground that under Section 133, 135 and 139 of the Contract Act, because of the acts of the creditor and the borrower, the liability of the plaintiff who Is a guarantor stood extinguished. Such question cannot be raised either before the Special Tribunal or the Machinery provided under the Act as they are not empowered with giving declaratory relief. Hence, we find that the conclusion of the trial Court that In view of Section 3 of the Karnataka Public Moneys (Recovery of Dues) Act, 1979, the jurisdiction of the Civil Court stands ousted or barred, is incorrect.
28. In so far as the State Financial Corporation Act, 1951, is concerned, again we find no express bar for Invoking jurisdiction of the Civil Courts contemplated By the legislation. In this regard, the trial Court and the learned Counsel for the respondents relied upon Section 29 of the State Financial Corporation Act to contend that the Injunction like one In question Is not permissible to be granted by the Civil Courts. In this regard, learned Counsel has relied upon the pronouncement of the Apex Court In the case of The State Financial Corporation and Anr. v. Jagdamba Oil Mills and Anr. .
29. On careful perusal of the aforesaid decision what the Apex court has laid down Is that while exercising jurisdiction under Article 226 of the Constitution, the High Court does not sit as a appellate authority over the acts and deeds of the Financial Corporation and the Courts other than the High Courts cannot interfere with the action under Section 29 of the State Financial Corporation Act, unless there is a statutory violation on the part of the State Financial Corporation. We have no quarrel with this proposition. Even otherwise, if one peruses the provisions of Sections 61 and 62 of the Karnataka Land Revenue Act, It is noted that though there Is specific bar of jurisdiction of the Civil Courts In respect of certain aspects mentioned In Section 61 Sub-clause (2), Section 62 Itself provides that nothing in Section 61 could prevent the civil Courts from entertaining any of the following suits mentioned therein. Sub-clause (a) of Section 62 states that suits against the State Government to contest the amount claimed or paid under protest, or recovered as land revenue on the ground that such amount Is In excess of the amount authorised In that behalf by the State Government or that such amount had previous such claim, payment or recovery been satisfied in whole or in part or that the plaintiff or the person whom he represents Is not the person liable for such amount Is maintainable. Hence this provision also does not support the findings of the trial Court as well as the contention of the learned Counsel for the respondents.
30. The last Act viz., Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, it Is contended that now a new machinery has been provided by way of Debt Recovery Tribunals in respect of the debt transactions or loan transactions and as this statute gives adequate machinery for the redressal of the persons like the plaintiff, It Is to be held that the jurisdiction of the civil courts under Section 9 Is barred. In this regard, It Is contended that Section 17 of the Act provides for an appeal and as such, the suit Is to be held as not maintainable. On perusal of Section 17 of the Act, it is to be noted that the appeal provided therein Is only In respect of any action taken or proposed to be taken under Section 13 of the Act and not otherwise. As we have already noted, the present claim of the plaintiff for the declaration is directly outside the purview of this provision also and hence it is held that the suit is maintainable. It is also to be noted that under Section 13 of the Act, the Machineries provided for enforcement of security Interest or for recovery of money, but It does not give or provide any forum for a borrower or a guarantor like the appellant In the present case to raise directly such question and seek the declaratory relief. Even under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, vide Section 17, wherein the Jurisdiction, power and authority of the Institution is defined, It Indicates that It is for the limited purpose and for the specified institutions alone, the civil courts does not have jurisdiction. Similarly Section 34 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, which is relied upon by the learned Counsel for the respondents does not create any bar In respect of suits of present nature.
31. On perusal and reading of Section 34, of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, It Indicates that no civil court shall have jurisdiction to entertain any suit In respect of any matter which a Debt Recovery Tribunal empowers by or under the Act to determine and no Injunction shall be granted by any court or other authorities in respect of any action taken or to be taken back. Since as already noted under Section 17 of the Recovery of Debts Due to Banks and Financial Institutions Act, jurisdiction Is limited. The bar under Section 34 cannot be invoked for the suits of the present type. Similar reliance placed by Section 35 of the said act that the provisions of this Act, overrides other laws, does not expressly or Impliedly prohibit the provisions of the civil courts to try the suits of alt nature as provided under Section 9 of CPC or explained by the Courts In variance pronouncements referred to above.
32. On entire consideration of the laws In this regard, and keeping in view the basic tenet of law that the suit of all nature are maintainable before the civil Courts and civil Courts have jurisdiction to try suits of all nature unless they are express or impliedly barred and as we find that there is neither expressed nor Implied bar under any of the provisions of the Karnataka Public Moneys (Recovery of Dues) Act and Securltisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, we find that the conclusion of the trial Court as to the non-maintainability of the suit Is totally Illegal and erroneous and hence liable to be set aside.
33. As we have already noted, the impugned judgment and decree ought to have been set aside only on the count of the very Illegal procedure adopted by the trial court. Added to that, even the conclusion of the trial Court regarding bar of jurisdiction Is Illegal and contrary to the law declared in this regard. We find that the Impugned judgment and decree Is unsustainable and hence liable to be set aside.
34. In the result and for the reasons mentioned above, the appeal Is allowed, the judgment and decree passed by the learned XVI Add). City Civil and Sessions Judge, Bangalore Is hereby set aside. As we have noted the trial Court has recorded the findings and proceeded to consider the case, without any evidence being recorded, In our view, It would be just and proper to remand the matter to the trial Court for recording the evidence and then proceed, as provided under the law. As the matter Is old, we direct the trial Court to conclude the entire procedure viz., recording of the evidence hearing the arguments and the passing of the judgment within three months from the date of receipt of a copy of this order. Both the parties are directed to appear before the trial Court on 18.2.2008, on which date, the trial Court shall fix the further dates and conclude the trial. It Is made clear that all the contentions raised by both the sides on merits are left open.
35. Office Is directed to send a copy of this judgment forthwith to the Court below.
36. Since the appeal Is allowed and the matter Is remanded back to the trial Court, the appellant Is entitled for refund of the entire Court fee as per Section 64 of the Karnataka Court Fees and Suits Valuation Act. In the peculiar circumstances of the case, there is no order as to costs.