TMI Blog2002 (3) TMI 825X X X X Extracts X X X X X X X X Extracts X X X X ..... tain a petition under article 226 and/or 227 of the Constitution. Transferred Cases stand disposed of accordingly. Parties to bear their own costs. - CIVIL APPEAL NO. 4679 OF 1995, ETC. - - - Dated:- 14-3-2002 - B.N. KIRPAL, Y.K. SABHARWAL AND K.G. BALAKRISHNAN, JJ. Harish N. Salve, Mukul Rohtagi, P.K. Goswami, Indra Sawhney, S. Wasim A. Qadri, Hemant Sharma, Sushma Suri, S.N. Terdol, B.V. Balaram Das, Anil Katiyar, Dhruv Mehta, Shobha, Anu Mehta, S.K. Mehta, Ranjan Mukherjee, Radha Rangaswami, Uday Gupta, Nina Gupta, Arpita Mahajan, Vineet Kumar, Ghanshyam Joshi, Krishnanand Pandeya, Sanjay Kapur, Shubhra Kapur, Rakesh K. Sharma, Arvind Kumar, Laxmi Arvind, Jaya Sinha, Sushil Kumar Jain, Harish J. Jhaveri, K.M.K. Nair, Shipra Ghose, Suresh C. Gupta, A. Guneshwar Sharma, Sanjay Pal, Kamal Mohan Gupta, Janendra Lal, M.K. Michael, A.P. Medh, D. Bharathi Reddy, H.K. Puri, S.K. Puri, Ujjwal Banerjee, Anindita Gupta, Sarla Chandra, E.C. Agrawala, Rathin Das, Joseph Pookkatt, Prasenjit Keswani, Prashant Kumar, P. Venugopal, P.S. Sudheer, K.J. John, Bina Gupta, A.V. Rangam, P.P. Singh, Sushma Suri, G.S. Chatterjee, Raja Chatterjee, Dalip Kumar Malhotra, Mridula Ray Bharadwaj, S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of their jurisdiction under articles 226 and 227 of the Constitution. 5. The validity of the said Act was successfully challenged before the Delhi High Court. By it s decision in Delhi High Court Bar Association v. Union of India AIR 1995 Delhi 323, against which appeal No. 4679 of 1995 is filed, the High Court held that though Tribunal could be constituted by the Parliament even though it was not within the purview of articles 323A and 323B of the Constitution, and that the expression administration of justice as appearing in entry 11A of list III of the Seventh Schedule to the Constitution would include Tribunals as well administering justice; the impugned Act was unconstitutional as it erodes the independence of the judiciary and was irrational, discriminatory, unreasonable, arbitrary and was hit by article 14 of the Constitution. In this judgment, it also quashed the appointment of a Presiding Officer of the Tribunal but that question no longer arises for consideration in these appeals. 6. In arriving at the aforesaid conclusion the Delhi High Court, inter alia, held as follows : ( a )The Act, in particular, section 17 did not have a provision for a counter-c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expressed by the Delhi High Court, came to the conclusion that the Parliament did not have the legislative competence to enact the Act inasmuch as entry 11A of list III could not include Tribunal and furthermore that the Parliament could not exercise power to enact this law under the provisions of Article 323A or 323B of the Constitution. In other words, a Tribunal could not be constituted for any matter not specified in articles 323A and 323B. 9. We will first deal with the question as to whether the Parliament has the competence to enact a law for establishing such the Banking Tribunals. In order to examine the question of the competence of the Parliament to enact such a law, it is pertinent to bear in mind the observations of this Court in Navinchandra Mafatlal v. CIT [1955] 1 SCR 829 at 836 which are as follows : "...As pointed out by Gwyer C.J. in The United Provinces v. Atiqa Begum [1940] F.C.R. 110 at page 134 none of the items in the Lists is to be read in a narrow or restricted sense and that each general word should be held to extend to all ancillary or subsidiary matters which can fairly and reasonably be said to be comprehended in it. It is, therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... islature from establishing Tribunals not covered by these articles, as long as there is legislative competence under an appropriate entry in the Seventh Schedule. Articles 323A and 323B do not take away that legislative competence. The contrary view expressed by the Karnataka High Court in D.K. Abdul Khader s case ( supra ) does not lay down the correct law and we expressly disapprove of the same. 14. The Delhi High Court and the Guwahati High Court have held that the source of the power of the Parliament to enact a law relating to the establishment of the Debt Recovery Tribunal is entry 11A of List III which pertains to administration of justice; Constitution and organisation of all Courts, except the Supreme Court and the High Courts . In our opinion, entry 45 of List I would cover the types of legislation now enacted. Entry 45 of List I relates to Banking . Banking operations would, inter alia, include accepting of loans and deposits, granting of loans and recovery of the debts due to the bank. There can be little doubt that under entry 45 of List I, it is the Parliament alone which can enact a law with regard to the conduct of business by the banks. Recovery of du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efendant, 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) Where a bank or a financial institution, which has to recover its debt from any person, has filed an application to the Tribunal under sub-section (1) 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 the Tribunal. (3) Every 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 : Provided that the fee may be prescribed having regard to the amount of debt to be recovered : Provided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f such application make such order as it thinks fit. (12) The Tribunal may make an interim order (whether by way of injunction or stay or attachment) 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. (13) (A) Where, at any stage of the proceedings, the Tribunal is satisfied, by affidavit or otherwise, that the defendant, with intent to obstruct or delay or frustrate the execution of any order for the recovery of debt that may be passed against him, ( i )is about to dispose of the whole or any part of his property; or ( ii )is about to remove the whole or any part of his property from the local limits of the jurisdiction of the Tribunal; or ( iii )is likely to cause any damage or mischief to the property or affect its value by misuse or creating third party interest, the Tribunal may direct the defendant, within a time to be fixed by it, either to furnish security, in such sum as may be specified in the order, to produce and place at the disposal of the Tribunal, when required, the said property of the value of the same, or s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (19) Where a certificate of recovery is issued against a company registered under the Companies Act, 1956 (1 of 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 (1 of 1956) and to pay the surplus, if any, to the company. (20) 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. (21) The Tribunal shall send a copy of every order passed by it to the applicant and the defendant. (22) The Presiding Officer shall 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. (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 mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... some of the respondents, it was contended that on a correct interpretation of rule 12(6) of the Debts Recovery Tribunal (Procedure) Rules, 1993, wherever any party desires the production of a witness for cross-examination, then his evidence could not be taken by way of affidavit but it would be mandatory for the Tribunal to require the production of the witness. It was submitted that this provision in pari materia with order 19 rule 1 of the Code of Civil Procedure, and the view taken by some of the Tribunals that a party does not have a right to cross-examine a witness, whose evidence is taken on affidavit, is not correct. 18. With the amendment of the Act in 2000 while a new section 19 was inserted in place of the existing one, section 22 has not undergone any change and the same reads as follows : "22. Procedure and powers of the Tribunal and the Appellate Tribunal. (1) The Tribunal and the Appellate Tribunal shall not be bound by the procedure laid down by the Code of Civil Procedure, 1908 (5 of 1908) but shall be guided by the principles of natural justice and, subject to the other provisions of this Act and of any rules, the Tribunal and the Appellate Tribunal shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order on the application as it thinks fit. (5) Where a defendant makes an admission of the full or part of the amount of debt due to a bank or financial institution, the Tribunal shall order such defendant to pay to the amount, the extent of the admission, by the applicant within a period of one month from the date of such order failing which the Tribunal may issue a certificate in accordance with Section 19 of the Act to the extent of amount of debt due admitted by the defendant. (6) The Tribunal may at any time for sufficient reason order that any particular fact or facts may be proved by affidavit, or that the affidavit of any witness may be read at the hearing, on such conditions as the Tribunal thinks reasonable : Provided that where it appears to the Tribunal that either applicant or defendant desires the production of a witness for cross-examination, and that such witness can be produced an order shall not be made authorising the evidence of such witness to be given by affidavit. (7) If the defendant denies his liability to pay the claim made by the applicant, the Tribunal may act upon the affidavit of the applicant who is acquainted with the facts of the case or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that the Tribunal may, at any time, for sufficient reason order a fact to be proved by affidavit or may pass an order that the affidavit of any witness may be read at the hearing. It is in the proviso to this sub-rule that a reference is made to the cross-examination of witnesses. 21. At the outset, we find that the rule 12 is not happily worded. The reason for establishing banking Tribunals being to expedite the disposal of the claims by the banks, the Parliament thought it proper only to require the principles of natural justice to be the guiding factor for the Tribunals in deciding the applications, as is evident from section 22 of the Act. While the Tribunal has, no doubt, been given the power of summoning and enforcing the attendance of any witness and examining him on oath, but the Act does not contain any provision which makes it mandatory for the witness to be examined, if such a witness could be produced. Rule 12(6) has to be read harmoniously with the other provisions of the Act and the Rules. As we have already noticed, Rule 12(7) gives the Tribunal the power to act upon the affidavit of the applicant where the defendant denies his liability to pay the claims. Rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecided by the procedural laws which are enacted from time to time. It is because of the enactment of the Code of Civil Procedure that normally all disputes between the parties of a civil nature would be adjudicated upon by the civil courts. There is no absolute right in anyone to demand that his dispute is to be adjudicated upon only by a civil court. The decision of the Delhi High Court proceeds on the assumption that there is such a right. As we have already observed, it is by reason of the provisions of the Code of Civil Procedure that the civil courts had the right, prior to the enactment of the Debt Recovery Act, to decide the suits for recovery filed by the banks and financial institutions. This forum, namely, that of a civil court, now stands replaced by a banking Tribunal in respect of the debts due to the bank. When in the Constitution articles 323A and 323B contemplate establishment of a Tribunal and that does not erode the independence of the judiciary, there is no reason to presume that the banking Tribunals and the appellate Tribunals so constituted would not be independent, or that justice would be denied to the defendants or that the independence of the judiciary wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge, the Act provides that it is only where the recovery of the money is more than Rs. 10 lakhs that the Tribunal will have the jurisdiction to entertain the application under section 19. With respect to suits for recovery of money less than Rs. 10 lakhs, it is the subordinate courts which would continue to try them. In other words, for a claim of Rs. 10 lakhs or more, exclusive jurisdiction has been conferred on the Tribunal but for any amount less than Rs. 10 lakhs, it is the ordinary civil courts which will have jurisdiction. The bifurcation of original jurisdiction between the Delhi High Court and the subordinate Courts is a matter which cannot have any bearing on the validity of the establishment of the Tribunal. It is only in those High Courts which have original jurisdiction that an anomalous situation arises where suits for recovery of money less than Rs. 10 lakhs have to be decided by the High Courts while the Tribunals have jurisdiction to decide suits for recovery of more than Rs. 10 lakhs. This incongruous situation, which can be remedied by the High Court divesting itself of the original jurisdiction in regard to such claims and vesting the said jurisdiction with the su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Recovery Officer may at any time or from time to time, by notice in writing, require any person from whom money is due or may become due to the defendant or to any person who holds or may subsequently hold money for or on account of the defendant, to pay to the Recovery Officer either forthwith upon the money becoming due or being held or within the time specified in the notice (not being before the money becomes due or is held) so much of the money as it sufficient to pay the amount of debt due from the defendant or the whole of the money when it is equal to or less than that amount. ( ii ) A notice under this sub-section may be issued to any person who holds or may subsequently hold any money for or on account of the defendant jointly with any other person and for the purposes of the sub-section, the shares of the joint holders in such amount shall be presumed, until the contrary is proved, to be equal. ( iii ) A copy of the notice shall be forwarded to the defendant at his last address known to the Recovery Officer and in the case of a joint account to all the joint holders at this last addresses known to the Recovery Officer. ( iv ) Save as otherwise provided in this sub- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt specified in the notice and further proceedings may be taken against him for the realisation of the amount as if it were a debt due from him, in the manner provided in sections 25, 26 and 27 and the notice shall have the same effect as an attachment of a debt by the Recovery Officer in exercise of his powers under section 25. (4) The Recovery Officer may apply to the court in whose custody there is money belonging to the defendant for payment to him of the entire amount of such money, or if it is more than the amount of debt due, an amount sufficient to discharge the amount of debt so due. (4A) The Recovery Officer may, by order, at any stage of the execution of the certificate of recovery, require any person, and in case of a company, any of its officers against whom or which the certificate of recovery is issued, to declare on affidavit the particulars of his or its assets. (5) The Recovery Officer may recover any amount of debt due from the defendant by distraint and sale of his movable property in the manner laid down in the Third Schedule to the Income-tax Act, 1961 (43 of 1961)." While section 25 provides for modes of recovery of debts either by attachment and sale ..... X X X X Extracts X X X X X X X X Extracts X X X X
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