Bombay High Court
Bank Of Maharashtra vs Konkan Chemicals Pvt. Ltd. & Others on 25 October, 1999
Equivalent citations: 2000(2)BOMCR72, (2000)1BOMLR214, [2000]100COMPCAS307(BOM), 2000(2)MHLJ435
Author: T.K. Chandrashekhara Das
Bench: T.K. Chandrashekhara Das
ORDER T.K. Chandrashekhara Das, J.
1. The applicant seeks for Judge's order to the effect that the offer dated 5-6-1999 made by M/s. Umang Enterprises for purchase of the suit hypothecated plant machinery stocks and all other movables for Rs. 27,78,600/- be accepted and direct the Receiver to hand over to said M/s. Umang Enterprises all the hypothecated securities lying at the factory of the 1st defendant etc.
2. The matter arises under execution of a decree obtained by the applicant. No one appears for the respondent. During the course of hearing of the application, a question arose as to whether, by virtue of section 31 of the Recovery of Debts due to Banks & Financial Institutions Act, 1993 hereinafter called "the Act" be transferred to the Debt Recovery Tribunal as the amount involved is exceeding Rs. 10 lakhs. As per section 18 of the said Act, this Court has no jurisdiction to deal with those matters if the claim involves more than Rs. 10 lacs in respect of the claim of Bank. In this case the claimant is Bank of Maharashtra. So before considering the request of the applicant for issuing the Judges Order, I have to answer this question.
3. The learned Counsel for the applicant Mr. Samdani contended that in execution of a decree even if the decree is more than Rs. 10 lacs, it will not come under the provisions of section 31 of the Act and is not required to be transferred to the Debt Recovery Tribunal. He submits that "other proceeding" appearing in section 31 will not take in the Execution Proceedings. In order to substantiate his argument he brought to my notice various provisions of the Act and tried to demonstrate in the light of section 44-A of the Code of Civil Procedure that it is not the intention of the Parliament. He contended that if this execution petition is included in the "other proceedings" under section 31, how the Debt Recovery Tribunal execute a decree coming under section 44-A. This circumstances exclude Execution Proceedings by implication in the period of "the other proceedings". According to me this is not a correct approach in interpreting a statute. I shall extract below the relevant provisions of the Act referred to in his submission.
"Section 2(b): 'application' means an application made to a Tribunal under section 19."
"Section 2(g): 'debt' means any liability (inclusive of interest) which is alleged as due from any person by a bank or 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."
"Section 17(1) 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.
(2) An Appellate Tribunal shall exercise, on and from the appointed day, the jurisdiction, powers and authority to entertain appeals against any order made, or deemed to have been made, by a Tribunal under this Act."
"Section 19 : Application to the Tribunal:
(1) Where a bank or a financial institution has to recover any debt from any person, it may make an application to the Tribunal within the local limits of whose jurisdiction,-
(a) the defendant, or each of the defendants, where there are more than one, at the time of making the application, actually and voluntarily resides, or carries on business or personally works for gain; or
(b) any of the defendants, where there are more than one, at the time of making the application, actually and voluntarily resides, or carries on business, or personally works for gain, or
(c) the cause of action, wholly or in part, arises.
(2) Every application under sub section (1) shall be in such form and be accompanied by such documents or other evidence and by such fee for filing the application as may be prescribed.
Provided that the fee may be prescribed having regard to the amount of debt to be recovered;
(3) On receipt of the application under sub-section (1) the Tribunal shall issue summons requiring the defendant to show cause within thirty days of the service of summons as to why the relief prayed for should not be granted.
(4) The Tribunal may, after giving the applicant and the defendant an opportunity of being heard, pass such orders on the application as it thinks fit to meet the ends of justice.
(5) The Tribunal shall send a copy of every order passed by it to the applicant and defendant.
(6) The Tribunal may make an interim order (whether by way of injunction or stay) against the defendant to debar him from transferring, alienating or otherwise dealing with, or disposing of, any property and assets belonging to him without the prior permission of the tribunal.
(7) The Presiding Officer shall issue a certificate under his signatures on the basis of the order of the tribunal to the Recovery Officer for recovery of the amount of debt specified in the certificate.
(8) The application made to the Tribunal under sub-section (2) shall be dealt with by it as expeditiously as possible and endeavour shall be made by it to dispose of the application finally within six months from the date of receipt of the application."
"Section 25 : Modes of recovery of debts :
The Recovery Officer shall, on receipt of the copy of the certificate under sub-section (7) of section 19, proceed to recover the amount of debt specified in the certificate by one or more of the followings modes, namely:-
(a) attachment and sale of the movable or immovable property of the defendant;
(b) arrest of the defendant and his detention in prison;
(c) appointing a Receiver for the management of the movable or immovable properties of the defendant."
"Section 31 : Transfer of pending cases :
(1) Every suit or other proceeding pending before any Court immediately before the date of establishment of a Tribunal under this Act, being a suit or proceeding the cause of action whereon it is based is such that it would have been, if it had arisen after such establishment, within the jurisdiction of such tribunal, shall stand transferred on that date to such Tribunal;
Provided that nothing in this sub-section shall apply to any appeal pending as aforesaid before any Court.
(2) Where any suit or other proceedings stands transferred from any Court to a Tribunal under sub-section (1) :-
(a) the Court shall, as soon as may be after such transfer, forward the records of such suit or other proceedings to the Tribunal; and
(b) the Tribunal may, on receipt of such records, proceed to deal with such suit or other proceeding, so far as may be, in the same manner as in the case of an application made under section 19 from the stage which was reached before such transfer or from any earlier stage or de novo as the Tribunal may deem fit."
4. As per the provisions mentioned above it can be seen that in order to set the Recovery Tribunal in motion, it has to be initiated by moving an application under section 19. In section 19, a detailed procedure to be followed by the Tribunal has been prescribed. It deals with, inter alia, where and how such application should be filed etc. depending upon the residence of the defendant and also about the cause of action wholly or partly arises. This section strongly indicates that the application to be filed under section 19 is in the nature of a suit. Successful culmination of such application filed under section 19 will entail a certificate being issued by the Presiding Officer of the Tribunal to the Recovery Officer under sub-section (7) of section 19 of the Act. Then the Recovery Officer will proceed to recover the debt resorting various coercive steps, if necessary, prescribed under section 25 of the Act.
5. As we have already seen that word 'debt' would take in a decree of a Civil Court which is recoverable or executable, on the date of the application filed under section 19. Supreme Court in the recent decision, stated this legal position in the case State Bank of Bikaner & Jaipur v. M/s. Ballabh Das & Co. & others, of the said judgment, the Supreme Court has observed that :
"According to the definition, the term "debt" means liability which is alleged as due from any person by a bank or a financial institution or by a consortium of banks or financial institutions, it should have arisen 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. The liability to be discharged may be in cash or otherwise. It would be immaterial whether the liability is secured or unsecured or whether it is payable under a decree or an order of any Civil Court or otherwise. However, it should be subsisting and legally recoverable on the date on which proceedings are initiated for recovering the same."
6. As the proceedings before the tribunal could be initiated only by making an application under section 19 of the Act, the inevitable conclusion that can be reached in the circumstances, is that a decree holder in order to execute a decree of Civil Court should first move to the tribunal by making an application under section 19 and then obtain order to send a certificate under sub-section (7) of section 19 of the Act to the Recovery Officer. The procedure laid down under section 19 does not indicate that a certificate under sub-section (7) of section 19 can straight way be issued by the tribunal to the Recovery Officer for recovery of the amount, if the debt recoverable is a decree. If the jurisdiction of the Tribunal could be invoked only under section 19 which does not cover expressly or by implication the execution applications pending, it is difficult to hold that the suit and "other proceedings" occurring under section 31 will take in the execution proceedings pending in Executing Court. If such a view is taken, all the Execution Proceedings pending in various stages at the commencement of the Act has to be transferred to the Tribunal and Tribunal has to treat such proceedings de novo as an application filed under section 19 and proceed further. The result will be utter confusion and it will cause undue delay. Even in case where only formal satisfaction of the decree is to be recorded, it can not be made by the Civil Court if such a narrow interpretation is given to the words "other proceedings" occurring the section 31 of the Act. Such an interpretation will undoubtedly run counter to the very object of the enactment intended to be achieved as disclosed in the Preamble of the Act which runs as under:
"An Act to provide for the establishment of Tribunals for expeditious adjudication and recovery of debts due to banks and financial institutions and for matters connected therewith or incidental thereto."
Under the Act a period of six months has been fixed for recovery of the debt.
7. If proceedings for execution of the decree pending in Civil Court on the date of corning into force of this Act is transferred, it will invite unnecessary and inordinate delay in recovering the amount. Therefore, logical conclusion can be arrived at keeping in mind the intention of the Parliament will be that, if execution petition is already pending at the commencement of the Act, the said Execution Proceeding can be continued by the Execution Court and need not be transferred to the tribunal under section 31 as, even though "other proceedings" appearing in section 31 will include the Execution Proceedings." Adverting to the argument of Mr. Samdani based on section 44-A of Code of Civil Procedure, according to me it is not a correct approach in interpreting a statute. Emphasis of this argument is the inability to execute a foreign decree by the Tribunal. According to him so long as such incapabilities of the tribunal does exist, we cannot assume such a power of execution of a decree is given to the Tribunal. In the light of the interpretation given by me to section 31 of the Act, I am unable to accept the submission made by Mr. Samdani.
8. However, A learned Judge of this Court mainly interpreting the word "other proceedings" has already held in Chamber Summons No. 963 of 1998 in Execution Application No. 2/93 that the Execution Proceedings pending before the Civil Court at the commencement of the Act, not liable to be transferred to the Debt Recovery Tribunal under section 31 of the Act. Though, dissenting to the reasoning of my brother F.I. Rebello, J., I do partially agree to his conclusion. I disagree because the said decision does not seem to have taken note of the scope of the definition of "debt" contained in the Act. As noted above, a decree payable on the date of commencement of the Act, will also include "debt". A decree after undergoing the process under section 19 will become a certificate to be issued under section 25 of the Act. Therefore, the observation of the learned Judge, that there is no provision in the Act which convert a decree into a certificate appears to me to be incorrect. So also, observations in that judgment that "other proceedings" appearing in section 31 will not include Execution Proceedings appeared to be erroneous. The very phraseology used in the section "Suit or other proceedings" will itself make it amply clear that execution of a decree will include the other proceedings. The very setting of various provisions in the Code of Civil Procedure will demonstrate the said position. Part I of Code of Civil Procedure deals with suits and Part II deals with the Execution. Therefore, suit or other proceedings should mean suit in Part I and other proceedings contained in other parts of the Code of Civil Procedure. Therefore, I have no doubt in my mind that the "other proceedings" occurring in section 31 of the Act, definitely include execution of a decree. The words "other proceedings" used by Parliament cannot be taken as to exclude the Execution Proceedings.
9. By following a pragmatic view and taking into account broad objectives to achieve through the enactment, an Execution Proceedings which reached in well advanced stage, need not be transferred. It will not be for the benefit of the Banks. Therefore, I am of the view that the Execution Proceedings already started at the establishment of the Tribunal under section 3 of the Act, this Court need not transfer those proceedings to the Tribunal and it can proceed with execution and record satisfaction according to law. But after the notification, no Execution Proceedings for decree for more than Rs. 10 lakhs by a Bank can be entertained under section 18 of the Act, in view of the unequivocal mandate contained in section 31 of the Act.
10. Having found in the foregoing paragraphs, that the Execution Proceedings pending in the Civil Court, at the time of establishment of the Tribunal, need not be transferred to the Debt Recovery Tribunal. Let us examine the case in hand.
11. Before adverting to the facts of this particular case, it is necessary to ascertain the date-on which the tribunal established in the State of Maharashtra. The Act though came into force, statutorily on 24th July, 1993 in sub-section (3) of section 1, the statute could not have been implemented in the absence of the notification envisaged under section 3 of the Act till 16th July, 1999. The sub-section (2) of section 3 reads thus:
"The Central Government shall also specify, in the notification referred to in sub-section (1), the areas within which the Tribunal may exercise jurisdiction for entertaining and deciding the applications filed before it."
12. As per the above provision it is for the Central Government that by notification to specify the areas covered under each Tribunal in deciding the applications before the Tribunal. Obviously this is for facilitating the Central Government to constitute the Tribunal for more than one States or bring two territories under one Tribunal taking into account the number of disputes that can be dealt with by the respective Tribunal. Accordingly the notification that is applicable to the territory of State of Maharashtra to bring under one Tribunal was issued, as I indicated, earlier only on 16th July, 1999. Therefore, essentially for the purpose of section 31 the date of establishment of Tribunal must be taken as 16th July, 1999. In other words, the "proceedings" occurring under section 31 must be the proceedings pending from on 16th July, 1999. Therefore, as I found earlier, as far as execution of decree is concerned, if it is initiated and pending as on 16th July, 1999, before this Court, it need not be transferred for the reasons stated above.
13. Coming to the facts and circumstances of this particular case, the consent decree have been passed by this Court on 16th June, 1992 against defendant No. 1. It is disclosed across the bar that the suit is pending against defendants and the suit is one for claiming a sum exceeding Rs. 10 lacs. The same is already transferred to the Debt Recovery Tribunal.
14. After passing the consent decree against 1st defendant, no formal application for execution of the decree as envisaged under section 51 in Part II and Order XXI of Code of Civil Procedure, has been made. In this case the consent decree provides instalment facility for discharging the debt to defendant No. 1 and it is also provided in the decree that if in the event of default of two instalments, the decree becomes executable for the entire balance amount. It is also provided in clause (4) of Minutes of the Decree that upon decree becoming executable, the Court Receiver appointed in this case can sell the hypothecated securities in execution of the decree. By virtue of this provision, rightly or wrongly the applicant without making a formal application for execution of the decree under section 51 read with Order XXI of Code of Civil Procedure, requested the Court Receiver by their letter dated 5th August, 1992 to execute the decree in the event of the default being committed by the defendant No. 1. On 23rd October, 1992 by Judge's Order, the Receiver was directed to take forcible possession of decretal securities. Therefore, it has to be assumed that this Court's power to execute the decree is set in motion by the letter dated 5th August, 1992 and the Judge's Order dated 23rd October, 1992. Subsequently, at few stages this Court has passed directions to the Receiver to take appropriate steps in execution of the decree.
15. As I indicated earlier, the execution of the decree passed against 1st defendant is in a far advanced stage. Therefore, I do not think it appropriate to examine in this case as to whether without a formal application for execution of the decree to the Court and without invoking the power under Order XXI of Code of Civil Procedure, the decree could be executed. For all practical purposes, out of sheer expediency, I treat the letter dated 5th August, 1992, addressed by the Advocate for the applicant to the Receiver appointed by this Court, as an application for execution. Consequently as on 16th July, 1999 the said Execution Proceedings is continuing in this Court and therefore, as held earlier in paragraphs this Execution Proceedings need not be transferred to the Debt Recovery Tribunal notwithstanding the fact that the claim is beyond Rs. 10 lacs. Consequently the applicant is entitled for the following orders:-
16. That the Receiver appointed in this case is directed to accept the offer of M/s. Umang Enterprises and oh receiving the aforesaid amount it can be kept in Receiver's custody till further orders. The Receiver is also directed that on making such payment by M/s. Umang Enterprises, it should be handed over to said M/s. Umang Enterprises all the hypothecated securities lying in the factory on 1st defendant.
17. The Judges order is disposed of accordingly.
18. The Court Receiver to act on the ordinary copy of this order authenticated by the Associate of this Court. P. A. to issue Ordinary copy of this order.
19. Order accordingly.