Hon’ble Supreme Court (2009.07.29) Nahar Industrial Enterprises Ltd. vs.Hong Kong & Shanghai Banking Corporation [ CIVIL APPEAL NO. 4796 OF 2009, Arising out of SLP (C) No.24715 of 2008] Held that;
In other words, if two courts are subordinate to different High Courts, one High Court has no power, jurisdiction or authority to transfer a case pending in any court subordinate to that High Court to a court subordinate to other High Court. It is only the Supreme Court (this Court) which may order the transfer; ( Page 48-49)
If the Tribunal was to be treated to be a civil court, the debtor or even a third party must have an independent right to approach it without having to wait for the Bank or Financial Institution to approach it first. The continuance of its counter-claim is entirely dependant on the continuance of the applications filed by the Bank. Before it no declaratory relief can be sought for by the debtor. It is true that claim for damages would be maintainable but the same have been provided by way of extending the right of counter-claim. (Page 60)
For the aforementioned purpose, we must bear in mind the distinction between two types of courts, viz., civil courts and the courts trying disputes of civil nature. Only because a court or a tribunal is entitled to determine an issue involving civil nature, the same by itself would not lead to the conclusion that it is a civil court. For the said purpose, as noticed hereinbefore, a legal fiction is required to be created before it would have all attributes of a civil court. The Tribunal could have been treated to be a civil court provided it could pass a decree and it had all the attributes of a civil court including undertaking of a full-fledged trial in terms of the provisions of the Code of Civil Procedure and/or the Evidence Act. It is now trite law that jurisdiction of a court must be determined having regard to the purpose and object of the Act. If the Parliament, keeping in view the purpose and object thereof thought it fit to create separate tribunal so as to enable the banks and the financial institutions to recover the debts expeditiously wherefore the provisions contained in the Code of Civil Procedure as also the Evidence Act need not necessarily be resorted to, in our opinion, by taking recourse to the doctrine of purposive construction, another jurisdiction cannot be conferred upon it so as to enable this Court to transfer the case from the civil court to a tribunal. It is difficult to accept the submission of Mr. Diwan that if such an interpretation is accepted, the same would remove the anomaly which would otherwise be present in the cases where recovery is for a sum below Rs. 10 lakhs and for those where recovery is for a sum of Rs. 10 lakhs or more. Parliament created such an anomaly, if any, knowingly. Expeditious recovery of the debts above Rs. 10 lakhs is the object of the Act. Casus omissus, if any, it is well-known cannot be supplied by the court. (Page 61-62)
CONCLUSION
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, did not even have any power to entertain a claim of set off or counter-claim. No independent proceedings can be initiated before it by a debtor. 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. Even in respect of set off or counter-claim, 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.
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 counter-claim would not survive which may be contrasted with Rule 6 of Order VIII 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 of 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 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., (1999) 4 SCC 710] The Tribunal, therefore, would not be a Civil Court. (Page 65-68) The Act, although, was enacted for a specific purpose but having regard to the exclusion of jurisdiction expressly provided for in Sections 17 and 18 of the Act, it is difficult to hold that a civil court’s jurisdiction is completely ousted.
Indisputably the banks and the financial institutions for the purpose of enforcement of their claim for a sum below Rs. 10 lakhs would have to file civil suits before the civil courts. It is only for the claims of the banks and the financial institutions above the aforementioned sum that they have to approach the Debt Recovery Tribunal.
It is also without any cavil that the banks and the financial institutions, keeping in view the provisions of Sections 17 and 18 of the Act, are necessarily required to file their claim petitions before the Tribunal. The converse is not true. Debtors can file their claims of set off or counter-claims only when a claim application is filed and not otherwise. Even in a given situation the banks and/or the financial institutions can ask the Tribunal to pass an appropriate order for getting the claims of set-off or the counter claims, determined by a civil court. The Tribunal is not a high powered tribunal. It is a one man Tribunal. Unlike some Special Acts, as for example Andhra Pradesh Land Grabbing (Prohibition) Act, 1982 it does not contain a deeming provision that the Tribunal would be deemed to be a civil court. The liabilities and rights of the parties have not been created under the Act. Only a new forum has been created. The banks and the financial institutions cannot approach the Tribunal unless the debt has become due. In such a contingency, indisputably a civil suit would lie. (Page 79-80)
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Comments by DRT Solutions
An Important Supreme Court Judgment about Tribunal, Court, DRT, Transfer from Court to Tribunal, Counter-claim and Appeal
. . . . . . . .If the borrower litigants find that the adjudication of their counter-claim is not being done properly, based on this judgment, they should request DRT to transfer the said counter-claim to civil court in the interest of justice, equity and good conscience. They will not only get complete justice but their right to appeal will be safe guarded without any deposit. Since in all the cases, the amount of counter-claim is much more than the claim of the bank, there is ‘No Debt Due’ and hence until and unless the counter-claim is decided, no recovery action can be initiated against any decision of the DRT. The following are the important aspects:-
(1) The ‘Tiwari Committee’ constituted by the RBI in 1981 first proposed establishment of Tribunals for expeditious recovery of bank overdues. The said committee recommended that these tribunals should be manned by persons (i.e. the Advocates and the Judges) having knowledge and experience in banking, industry and finance. Till date (even after 20 years of establishment of DRTs) the said recommendation has not been implemented. On one hand, huge court fee and other charges are being collected by the DRTs, no money is being spent on the training of the Judges and the Advocates on the essential knowledge of banking, industry and finance. This is clearly affecting award of justice particularly to the borrowers and guarantors.
(2) The Supreme Court of India, 15 years back laid down the law that the Tribunals be transferred from control of the Administrative Ministry (i.e. Ministry of Finance in case of the DRTs) to Ministry of Law. Till date even after the SC verdict, the DRTs are not being transferred from the control of Ministry of Finance to Ministry of Law. The Ministry of Finance continues to post bank officials as DRT Judges and Recovery Officers. The Ministry of Finance continues to hold regular meetings with the DRT Judges asking them to expedite bank recoveries. All these are open violations of Principles of Natural Justice which are governing the DRT Act and the Securitisation Act. Under such facts and circumstances, the borrowers and guarantors can not expect justice.
(3) The DRT Act was enacted in 1993. The provision of counter-claim in this Act was incorporated in 2000 and is exactly the same as in CPC 1908. In CPC itself such provision was made in 1976. The salient features of the counter-claim are as under:-
(a) The counter-claim is the suit filed by the borrower. Whereas the banks are bound to file their claim for adjudication in DRTs, the borrowers are not bound to do so. The bar of civil court vide section 18 of the DRT Act applies to the banks only.
(b) Further as per Section 19(11) of the DRT Act, “Where a defendant sets up a counter-claim and the applicant contends that the claim thereby raised ought not be disposed of but 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.”
(c) In view of above, either the DRT has to adjudicate the counter-claim following the established procedure laid down in the CPC or transfer the case to the civil court.
(d) Since the amount of counter-claim is much more than the claim of the bank, there can not be any recovery action as there is ‘No Debt Due’ till the counter-claim is fully adjudicated upon either by the DRT or by the civil court.
(4) While all out emphasis has been laid on expeditious adjudication and enforcement of securities to free blocked public funds, an important aspect has not been paid attention. If all these matters are so important, the banks and the financial institutions have to be always careful and ever vigilant to avoid such actions which will delay the matters in court of law. The RBI has emphasized all these aspects since 1976 but the bank bureaucracy has not been serious in respect of e.g. signing of blank documents, execution of proper documents, eliminating questionable one side documents, providing copy of complete set of documents executed, timely sanction of needed funds, timely revival, restructure and rehabilitation, avoiding questionable delays, strict observance of RBI Guidelines and Govt policies, strict observance of duty of care, strict observance of Supreme Court leading judgments like Kripack, Maneka Gandhi, Mardia etc., proper determination of NPA as per RBI Guidelines, proper process for initiation of declaration of willful defaulters, proper conduct and actions of the Authorised Officers, strict legal audit by independent auditor before issue of notice u/s 13(2), 13(4), application u/s 14 and any appeal, transfer of DRTs from Ministry of Finance to Ministry of Law etc. If all these are strictly enforced, the consequent cases filed before DRT will be expeditiously decided. Further the burden of unnecessary cases on DRTs and Civil Courts will come down heavily. Under such circumstances only there will be expeditious recovery. Otherwise the present system of mindless litigation and unsatisfactory recovery will continue.
(5) The bureaucracy in banks and financial institutions instead of correcting themselves and devising remedial internal measures are more inclined to secure stronger legal powers, having controls on DRTs through Ministry of Finance by appointing bank officers as Judges and Recovery Officers in DRTs and blaming others. It is like if you point out one finger to others, you forget that three fingers are pointing towards you.
(6) Since the banks and financial institutions are less likely to correct themselves, the legal compulsions like damages and counter-claims will alone force them to do so.
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