IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION No 9169 of 1998 WITH CIVIL APPLICATION NO.9977 of 2001 For Approval and Signature: Hon'ble MR.JUSTICE K.R.VYAS ============================================================ 1. Whether Reporters of Local Papers may be allowed : YES to see the judgements? 2. To be referred to the Reporter or not? : NO 3. Whether Their Lordships wish to see the fair copy : NO of the judgement? 4. Whether this case involves a substantial question : NO of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder? 5. Whether it is to be circulated to the Civil Judge? : NO -------------------------------------------------------------- P K THAKKAR CONSTRUCTION PVT. LTD. Versus ASSISTANT GENERAL MANAGER -------------------------------------------------------------- Appearance: 1. Special Civil Application No. 9169 of 1998 MR NANDLAL THAKKAR for Petitioner No. 1 MR JS YADAV for Respondent No. 1 MR SUNIT S SHAH for Respondent No. 2 MR AY KOGJE for Respondent No. 2 -------------------------------------------------------------- CORAM : MR.JUSTICE K.R.VYAS Date of decision: 09/10/2001 ORAL JUDGEMENT 1. The petitioner in this petition under Article 227 of the Constitution of India has challenged the legality of the proceedings of original Recovery Application No. 147 of 1998 initiated by the respondent Bank before the Debts Recovery Tribunal (hereinafter referred to as 'DRT') Ahmedabad and prayed for quashing and setting aside the said proceedings. The petitioner has also prayed to expedite the hearing of Special Civil Suit No. 168 of 1997 filed by it before the learned Civil Judge, Senior Division, Ahmedabad Rural. In the suit filed by the petitioner, the respondent, vide an application Ex. 226 dated 11.1.2001, requested the trial court to transfer the said suit to DRT in view of the decision of the Apex Court in the case of United Bank of India Vs. Abhijeet, AIR 2000 SC 2957. The learned trial judge, by his order dated 27.7.2001, allowed the said application and ordered R.& P. to be sent to the DRT for further trial in accordance with law. The petitioner has challenged the said order of the trial court in Civil Application No. 9977 of 2001 and prayed for quashing and setting aside the order dated 27.7.2001 passed below Ex. 226 by the trial court. On 12.9.2001, after hearing the learned Counsel for the parties, the said Civil Application was ordered to be heard with the main petition. The main petition was also fixed for hearing on 25.9.2001. This Court stayed the operation and implementation of the order of the trial court in the meantime. 2. The petitioner is a private limited company registered under the Companies Act, 1956 and is engaged in the business as a contractor carrying out construction work. The respondent bank gave an advertisement in the local daily newspaper for construction of training centre building in accordance with the plans approved by the bank and their architect on the vacant land. Pursuant to the advertisement published in newspaper for construction of training centre building, the petitioner made an offer by its letter dated 1.2.1994 and the respondent bank, by its letter dated 25.2.1994, accepted the proposal for constructing premises for housing residential Staff Training Center on certain terms and conditions vide letter dated 26.7.1994 annexure E addressed by the bank to the petitioner. It was conveyed that the bank has agreed to grant a term loan of Rs. 99 lacs for the construction of premises of Staff Training Center at Ahmedabad. The bank in fact disbursed the amount phasewise on completion of particular work. The respondent bank disbursed Rs. 94 lacs to the petitioner. The bank was to disburse Rs. 5 lacs on completion of the project and on handing over possession. However, the respondent bank did not take possession of the premises. As per the terms and conditions agreed between the parties, the petitioner informed the respondent bank in writing on 18.5.1995 to take possession of the training centre. One more reminder was sent on 12.7.1995. It is the case of the petitioner that he thereafter made oral as well as written requests to the respondent bank authorities for taking possession of training center after execution of lease deed and release of balance amount of Rs. 5 lacs. However, for the reasons best known to the respondent bank, no action was taken. The petitioner thereafter gave legal notice on 15.8.1996 annexure D to the petition. On receiving the said notice, the respondent bank, gave notice dated 29.8.1997 for alleged breach of contract. The respondent bank ultimately rescinded the contract without any cause or reason. The petitioner was, therefore, left with no other alternative but to file a suit being Special Civil Suit No. 168 of 1997 in the Court of learned Civil Judge, Senior Division, Ahmedabad Rural for damages under the contract and for recovery of Rs. 3,08,48,332/-. The said suit was filed on 15.9.1997. The respondent Bank also filed a Recovery Application No. 147 of 1998 before the DRT on 8.6.1998 for recovery of their dues from the petitioner. Along with the recovery application, an application for stay was also filed by the respondent restraining the petitioner from transferring possession of the aforesaid training center or creating any charge or encumbrance upon the same. The petitioner was served with summons on 11.6.1998 who moved this Court by way of present petition challenging the jurisdiction of DRT to entertain the application filed by the petitioner. As the trial court was not prohibited from proceeding further with the suit of the petitioner, during the pendency of the petition, the trial court proceeded further with the hearing of the suit and recorded evidence of the petitioner as stated by the learned Counsel for the petitioner. It is only on 11.1.2001, the respondent bank filed an application Ex. 226 requesting the trial court to transfer the suit to DRT for further trial. In view of the judgment of the Supreme Court reported in the case of United Bank of India Vs. Abhijeet Tea Co.Ltd., AIR 2000 SCC 2957, the trial court transferred the suit to DRT. As stated above, the said order of the trial court is under challenge in the present proceedings. 3. Heard learned Counsel appearing for the petitioner as well as learned Advocate General Mr. Shelat with Mr. Sunit Shah, for the respondent Bank. 4. Learned Counsel for the petitioner submitted that the amount advanced by the bank is neither a'debt' nor a term loan. The transaction entered into between the parties does not attract any of the requirement of section 2(g) of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (hereinafter referred to as 'the Act'). It is, therefore, submitted that the DRT has no jurisdiction to decide the dispute between the parties. It is submitted that as the jurisdiction of the Tribunal is challenged as provided under section 18 of the Act, this Court will have overall jurisdiction under Article 227 of the Constitution of India for setting aside the proceedings initiated by the respondent bank before the Tribunal. Learned Counsel challenged the decision of the trial court of transferring the suit by contending that the trial court misread the decisions of the Apex Court. It was contended that the trial court has failed to consider that the DRT does not have jurisdiction to entertain suit under the Contract Act and under Specific Relief Act as the suit of the plaintiff is for damages and is not within the framework and meaning of the Act. In the submission of the learned Counsel for the petitioner, the Tribunal will have jurisdiction and authority to entertain the Recovery Application of the bank or the financial institutions and in any case, it will not decide the suit for damages filed by any person against the bank or the financial institution. It was further submitted that section 31 of the Act provides that every suit or other proceeding pending before any Court immediately before the date of establishment of a Tribunal under the Act shall stand transferred to the Tribunal. However, the present suit which is filed subsequent to the establishment of the Tribunal, cannot be transferred to DRT. 5. Learned AG appearing for the respondent Bank raised preliminary contention regarding the maintainability of the petition. He, after inviting my attention to the relevant provisions of the Act and Rules, submitted that the petitioner in the instant case has been served with summons and he has still not filed written statement and in absence of adjudication and any judicial order having been passed, the petition is at premature stage and, therefore, not maintainable. Learned Advocate General submitted that this Court shall not exercise its jurisdiction when no adverse order is passed by the Tribunal. On merits of the case, it was submitted that DRT is the only forum which can decide the dispute between the parties as the word 'debt' is defined exhaustively in the transactions having taken place between the parties. On the question of transfer of suit of the petitioner to DRT, learned Advocate General submitted that in view of the amendment made in section 19, the Tribunal can decide the question of set off as well as counter claim. The learned Advocate General, however, fairly conceded that the said question can arise provided this Court dismisses the petition and allows the DRT to decide the application filed by the petitioner. In other words, in the submission of learned Advocate General, if this Court allows the petition and sets aside the proceedings initiated by the respondent Bank before DRT, in that event, civil court can decide the suit for damages filed by the petitioner. To substantiate their submissions, both the learned Counsel have cited number of authorities, which I will refer at appropriate stage. 6. For the purpose of appreciating submissions advanced before, it is necessary to refer to the relevant provisions of the Act. The Recovery of Debts Due to Banks and Financial Institutions Act, 1993 provides for establishment of Tribunals and appellate Tribunals for expeditious adjudication and recovery of debts of the banks and financial institutions. Section 2(d) defines 'bank' to mean: xxxxxxx (iii) State Bank of India xxxxx Section 2(g) defines 'debt' as under: "2(g): 'debt' means any liability (inclusive of interest) which is claimed 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 assigned, or whether payable under a decree or order of any Civil Court or any arbitration award or otherwise or under a mortgage and subsisting on, and legally recoverable on, the date of the application." From the plain reading of the expression 'debt', it is clear that it has to be given a widest amplitude to mean any liability which is claimed as due from any person by a bank or financial institutions during the course of any business activity undertaken by the bank either in cash or otherwise, whether secured or unsecured, or assigned, or whether payable under a decree or order of any Civil Court or any arbitration award or otherwise or under a mortgage and legally recoverable on the date of the application. Section 2(o) defines 'Tribunal' to mean the Tribunal established under subsection (1) of section 3. Section 3 deals with jurisdiction, powers and authority conferred on the Tribunals. Section 17 of Chapter III also deals with the jurisdiction, powers and authority of Tribunals. Section 17(1) reads as under: "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." Reading the said provisions, it is clear that the Tribunal shall exercise on and from the appointed day, the jurisdiction, powers and authority to entertain and decide applications from the banks for recovery of debts due to such banks and financial institutions. Section 18 deals with bar of jurisdiction and provides that on and from the appointed day, no Court or other authority shall have, or be entitled to exercise, any jurisdiction, power or authority (except the Supreme Court, and a High Court exercising jurisdiction under Arts. 226 and 227 of the Constitution ) in relation to the matters specified in Section 17. Section 19 deals with the application to Tribunal which is substituted by new section with effect from 20.1.2000. Sub-section (1) of section 19 entitles a bank or financial institution to make an application to the Tribunal to recover debt from any person. Clauses (a), (b) and (c) of the said sub-section provide for details of the local limits of whose jurisdiction the defendant or defendants reside at the time of making application to the Tribunal. Sub-section (2) provides that where a bank or a financial institution which has to recover its debt from any person has filed an application to the Tribunal and against the same person, another bank or financial institution also has a claim to recover its debt, then the later bank or financial institution may join the applicant bank or financial institution at any stage of the proceedings before the final order is passed, by making an application to that Tribunal. Sub-section (3) provides that application under sub-section (1) or sub-section (2) shall be in such form and accompanied by such documents or other evidence and by such fee as may be prescribed. Sub-section (4) provides that the Tribunal is required to 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. Under sub-section (5), the defendant is required to file written statement on or before the first hearing or within such time as the Tribunal may permit. Under sub-section (6), defendant is required to give set off against the applicant's demand and ascertain the sum of money legally recoverable by him. The defendant is required to claim set off at the first hearing of the application, and not afterwards unless permitted by the Tribunal. The defendant is also required to present a written statement containing the particulars of the debt sought to be set off. Sub-section (7) provides that the written statement shall have the same effect as a plaint in a cross suit so as to enable the Tribunal to pass final order in respect of both of the original claims and of the set off. Under sub-section (8), in addition to the right of pleading a set off under sub-section (6), the defendant by way of counter claim against the claim of the applicant, can claim such right. Sub-section (9) provides that 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. Sub-section (10) empowers the applicant to file written statement in answer to counter claim of the defendant within such period as may be fixed by the Tribunal. Under sub-section (11), the Tribunal, before issues are settled in relation to the counter claim, can exclude counter claim by way of an independent action upon the application made by the applicant in that regard. Sub-section (12) authorises the Tribunal to pass interim orders against the defendant to debar him from transferring, alienating or disposing of any property or assets belonging to him without the prior permission of the Tribunal. Sub-section (13A) authorises the Tribunal to pass appropriate orders either to furnish security to satisfy the certificate for recovery of debt or to appear and show cause why he should not furnish security in case the defendant intents to obstruct or delay or frustrate the execution of any order for the recovery of debt that may be passed against him. Sub-section 13(B) provides that where the defendant fails to show cause why he should not furnish security or fails to furnish the security required within the time fixed by the Tribunal, the Tribunal may order the attachment of the whole or such portion of the properties claimed by the applicant as the properties secured in his favour or otherwise owned by the defendant as appears sufficient to satisfy any certificate for the recovery of debt. Under sub-section (14), the applicant is required to specify the property required to be attached and the estimated value thereof unless the Tribunal otherwise directs. Under sub-section (15), the Tribunal may also in the order direct the conditional attachment of the whole or any portion of the property specified under sub-section (14). Under sub-section (16), if the attachment is made without complying with the provisions of sub-section (13), the same shall be declared as void. Under sub-section (17), the Tribunal is authorised to attach the property and also authorised to detain a person in civil prison not exceeding three months in case the person disobeys the order made by the Tribunal under sub-sections (12), (13) and (18). Sub-section (18) authorises the Tribunal to pass orders appointing receiver of the property whether before or after the grant of certificate for recovery of debt or to remove the person from possession or custody of the property or to commit the same to possession, custody or management of the receiver or to confer upon the receiver all such powers as to bringing and defending suits in the Courts or filing and defending applications before the Tribunal and for the realization, management, protection, preservation and improvement of the property, collection of rents and profits thereof, the application and disposal of such rents and profits, and the execution of documents as the owner himself has or such of those powers as the Tribunal thinks fit and also to appoint a Commissioner for preparation of an inventory of the properties of the defendant or for the sale thereof. Sub-section (19) provides that where a certificate of recovery is issued against a company registered under the Companies Act, 1956, the Tribunal may order the sale proceeds of such company to be distributed among its secured creditors in accordance with the provisions of Section 529-A of the Companies Act, 1956 and to pay the surplus, if any, to the company. Sub-section (20) provides that the Tribunal may, after giving the applicant and the defendant an opportunity of being heard, pass such interim or final order, including the order for payment of interest from the date on or before which payment of the amount is found due up to the date of realisation or actual payment, on the application as it thinks fit to meet the ends of justice. Under sub-section (21), the Tribunal is required to send a copy of every order passed by it to the applicant and the defendant. Under sub-section (22), the presiding officer is required to issue a certificate under his signature on the basis of the order of the Tribunal to the Recovery Officer for recovery of the amount of debt specified in the certificate. Under sub-section (23), where the Tribunal which has issued a certificate of recovery is satisfied that the property is situated within the local limits of the jurisdiction of two or more Tribunals, it may send the copies of the certificate of recovery for execution to such other Tribunals where the property is situated, provided in a case where the Tribunal to which the certificate of recovery is sent for execution finds that it has no jurisdiction to comply with the certificate of recovery, it shall return the same to the Tribunal which has issued it. Under sub-section (24), the Tribunal is required to deal with the application under sub-section 1 and 2 and dispose of finally within 180 days from the date of receipt of the application. Under sub-section (25), the Tribunal is required to make such order and give such directions as may be necessary or expedient to give effect to its order to prevent abuse of its process or to secure the ends of justice. Under section 20, right is given to an aggrieved person against the order made by the Tribunal to prefer an appeal to the Appellate Tribunal. Section 21 requires a person to deposit with the Appellate Tribunal 75% of the amount of debt so due from him as determined by the Tribunal. Section 25 prescribes mode of recovery of debts and authorises the Recovery Officer to recover the amount of debt specified in the certificate under sub-section (7) of section 19 by (a) attachment and sale of movable and immovable property of the defendant or assets of the defendant; (b) arrest of the defendant and his detention in prison and (c) appointing a receiver for the management of the movable or immovable properties of the defendant. Section 28 also prescribes other modes of recovery. Section 31 deals with transfer of pending cases and provides that every suit or other proceeding pending before any Court immediately before the date of establishment of a Tribunal under the 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. However, the said provision shall not apply to any appeal pending as aforesaid before any Court. Sub-section (2) of section 31 provides that where any suit or other proceeding stands transferred from any Court to a Tribunal under sub-section (1), the Court shall, as soon as may be after such transfer, forward the records of such suit or other proceeding 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. 7. Reading the aforesaid provisions of the Act, it is amply clear that the provisions of the Act are complete Code by themselves. Under the Act, Tribunals and Appellate Tribunals are established for expeditious adjudication and recovery of debts due to them and financial institutions. The entire scheme of the Act suggests that the Tribunal shall adjudicate dispute in summary proceeding. 8. Dealing with the preliminary contention advanced by the learned Advocate General that the petition is not maintainable as it is at premature stage since the Tribunal has not adjudicated the disputes and, therefore, no adverse order is passed, ordinarily, this Court would not like to exercise its power under Article 227 of the Constitution in favour of a private party who has in substance challenged the dues of the Bank. However, there are cases and cases where the jurisdiction and/ or powers of authority is under challenge. This Court, by taking a shortcut in the matter, just cannot relegate the party to exhaust alternative remedy. It is also not certain that the said remedy will be efficacious remedy for the party which is challenging jurisdiction and power of the authority. In the circumstances, it will be nothing but to complete a formality. In the instant case, the common dispute between the parties is whether the transaction entered into between them amounts to debt which would attract the provisions of section 2(g) of the Act. For deciding the same, no oral evidence is required to be led. The said dispute can be adjudicated in view of the documentary evidence which is in the form of correspondence between the parties produced by the petitioner to support their case. The parties have produced the plaint as well as written statement of the civil suit by way of affidavit in the present proceedings. Not only that, necessary affidavits have also