2023 (12) TMI 1434 - HC - Indian Laws

Rejection of application moved by the Appellants Defendants under Order VII Rule 10 and Rule 11(d) of the Code of Civil Procedure 1908 read with Section 19(6) to (10) of the Recovery of Debts and Bankruptcy Act 1993 - jurisdiction to entertain the suit filed by the Plaintiff for recovery of loss damages and compensation - HELD THAT - Sub Section 1A of Section 13 provides that a person aggrieved by a judgment or order can file an appeal however the said provision is to be read in conjunction with the proviso which specifically states that an appeal shall lie only from orders which are specifically enumerated under Order XLIII of the CPC. The occurrences of the expression shall and specifically in the proviso has to be noted for correctly understanding the legislative intent in framing the scheme of Section 13 of the Act of 2015. It is also noteworthy that the order under challenge in this appeal has been passed by the learned trial court rejecting the Application moved by the Defendants under Order VII Rule 10 and Rule 11(d) of the CPC. Such an order is not enumerated in Order XLIII of the CPC though Rule 1(a) of Order XLIII enlists an order passed under Order VII Rule 10 for returning the plaint. Thus Order XLIII enlists the order passed on an Application under Order VII Rule 10 if it is allowed however it does not enlist the order in case such an Application is rejected. The Hon ble Delhi High Court in the case of D H India Ltd. 2020 (3) TMI 1458 - DELHI HIGH COURT held the appeal to be maintainable by observing that the Court in that case was not concerned with the challenge to the order passed under Order VI Rule 17 of the CPC rather under Order V of Chapter II of the 2018 Rules of the High Court. Conclusion - Section 13(1A) of the Act of 2015 would lie only against the judgment and orders which are enumerated or enlisted under Order XLIII of the CPC. An order rejecting an Application moved under Order VII Rule 10 or Order VII Rule 11(d) of the CPC is not enumerated or enlisted in Order XLIII of the CPC hence such an order is not appealable. The instant appeal is not maintainable - Appeal dismissed.

Summary

Issues Presented and Considered:

The core legal questions considered by the Court in this appeal are:

1. Whether the appeal filed under Section 13(1A) of the Commercial Courts Act, 2015 (the Act of 2015) against the order rejecting the Defendants' application under Order VII Rule 10 and Rule 11(d) of the Code of Civil Procedure, 1908 (CPC), read with Section 19(6) to (10) of the Recovery of Debts and Bankruptcy Act, 1993 (Recovery Act, 1993), is maintainable before the Commercial Appellate Division of the High Court.

2. Whether the jurisdiction to entertain the suit filed by the Plaintiff for recovery of loss, damages, and compensation, including allegations of fraud, lies exclusively with the Debts Recovery Tribunal (DRT) under the Recovery Act, 1993, or whether the suit can be entertained by the Civil Court.

3. The scope of inquiry and jurisdiction of the DRT under Section 17 of the Recovery Act, 1993, especially concerning allegations of fraud by the Defendants (bankers), and whether such issues fall within or outside the DRT's adjudicatory domain.

4. The interpretation of Section 13 of the Act of 2015, before and after its amendment in 2018, particularly the proviso restricting appeals only to orders enumerated under Order XLIII of the CPC and Section 37 of the Arbitration and Conciliation Act, 1996.

5. The applicability and precedential value of judgments from other High Courts, including the Delhi High Court and coordinate benches of this Court, regarding the maintainability of appeals under Section 13(1A) of the Act of 2015.

Issue-wise Detailed Analysis:

1. Maintainability of the Appeal under Section 13(1A) of the Act of 2015

Legal Framework and Precedents: Section 13 of the Act of 2015 governs appeals from orders and judgments of Commercial Courts and Commercial Divisions. The proviso appended to sub-section (1) of Section 13 restricts appeals to only those orders specifically enumerated under Order XLIII of the CPC and Section 37 of the Arbitration and Conciliation Act, 1996. The amendment in 2018 replaced the word "decision" with "judgment or order" but retained the proviso.

Precedents such as the Division Bench judgments in Skil-Himachal Infrastructure & Tourism Ltd. and Shailendra Bhadauria emphasize that the right of appeal must be conferred in clear words by the statute and that only orders enumerated under Order XLIII CPC are appealable under the Act of 2015. The Supreme Court ruling in Kandla Export Corporation v. OCI Corporation further clarifies that the proviso to Section 13 should be harmoniously construed with the main provision and restricts appeals against orders not listed in Order XLIII.

Court's Interpretation and Reasoning: The Court held that since the impugned order is a rejection of an application under Order VII Rule 10 and Rule 11(d) of the CPC, it is not enumerated under Order XLIII of the CPC. Although Order XLIII Rule 1(a) provides for appeal against orders allowing return of plaint under Order VII Rule 10, it does not provide for appeal against rejection of such applications. Similarly, no appeal lies against orders under Order VII Rule 11(d).

The Court distinguished the judgment of the Delhi High Court in D & H India Ltd., where the appeal was maintainable because it arose from a Registrar's order under the Delhi High Court Original Side Rules, not under Order VI Rule 17 CPC. The Court also found the Delhi Chemical and Pharmaceutical Works decision inapplicable as it expressed doubts on D & H India Ltd. and did not alter the legal position.

The Court further rejected reliance on the Skil-Himachal Infrastructure judgment as it dealt with a different order (conditional leave to defend summons for judgment under Order XXXVII Rule 5 CPC) but affirmed its principle that only orders enumerated under Order XLIII CPC are appealable under the Act of 2015.

Application of Law to Facts: The appeal challenges the rejection of an application to dismiss the plaint for lack of jurisdiction. Since the order rejecting the application is not enumerated under Order XLIII CPC, the appeal is not maintainable under Section 13(1A) of the Act of 2015.

Treatment of Competing Arguments: The Defendants argued for maintainability relying on Delhi High Court precedents, but the Court found those cases distinguishable or doubtful. The Plaintiff contended that the appeal was not maintainable, which the Court accepted based on statutory interpretation and binding precedents.

Conclusion: The appeal is not maintainable and must be dismissed.

2. Jurisdiction to Entertain Suit Alleging Fraud and Recovery Claims

Legal Framework and Precedents: The Recovery of Debts and Bankruptcy Act, 1993, vests jurisdiction in the DRT to adjudicate disputes relating to recovery of debts due to banks and financial institutions under Section 17. However, the jurisdiction of the DRT is limited to matters within the scope of the Recovery Act and does not extend to issues outside its ambit, such as allegations of fraud.

Court's Interpretation and Reasoning: The Trial Court held that the suit filed by the Plaintiff alleges fraud by the Defendants in invoking SARFAESI measures and seeks declaratory reliefs beyond mere recovery of debt. The DRT's jurisdiction is confined to inquiry and adjudication of debt recovery claims under Section 17 of the Recovery Act, and does not extend to issues of fraud or other civil claims.

The Court agreed that the suit's claim for declaration and damages based on fraud falls outside the DRT's jurisdiction and can be entertained by the Civil Court.

Key Evidence and Findings: The Plaintiff's plaint alleges fraudulent invocation of SARFAESI Act provisions and seeks compensation and damages amounting to over Rs. 100 Crores. The Defendants' claim of default and initiation of SARFAESI proceedings and recovery application under Section 19 of the Recovery Act was also noted.

Application of Law to Facts: Since the suit involves fraud allegations and claims beyond recovery of debt, the Civil Court has jurisdiction to entertain the suit despite the pendency of recovery proceedings before the DRT.

Treatment of Competing Arguments: The Defendants contended that the suit is barred for lack of jurisdiction as the DRT has exclusive jurisdiction under the Recovery Act. The Court rejected this, holding that the DRT's jurisdiction is confined to debt recovery claims and does not extend to fraud allegations and consequential reliefs sought by the Plaintiff.

Conclusion: The Civil Court has jurisdiction to entertain the suit alleging fraud and seeking damages, and the DRT's jurisdiction does not oust the Civil Court's jurisdiction in such matters.

3. Scope of Inquiry under Section 17 of the Recovery Act, 1993

Legal Framework and Precedents: Section 17 of the Recovery Act empowers the DRT to adjudicate disputes relating to recovery of debts due to banks and financial institutions. However, the scope of inquiry is limited to the debt recovery claim and does not extend to allegations of fraud or other collateral issues.

Court's Interpretation and Reasoning: The Trial Court and this Court concurred that the DRT's jurisdiction is limited to the recovery of debt and does not include inquiry into fraud allegedly committed by the bankers in invoking SARFAESI proceedings.

Application of Law to Facts: Since the Plaintiff's suit involves allegations of fraudulent conduct by the Defendants, such issues are beyond the scope of the DRT's jurisdiction and must be adjudicated by the Civil Court.

Conclusion: The DRT's jurisdiction under Section 17 is confined to recovery claims and does not extend to fraud allegations, which fall within the Civil Court's jurisdiction.

4. Interpretation of Section 13 of the Commercial Courts Act, 2015

Legal Framework and Precedents: Section 13 governs appeals from orders and judgments of Commercial Courts and Commercial Divisions. The 2018 amendment replaced "decision" with "judgment or order" but retained the proviso limiting appeals to orders enumerated under Order XLIII CPC and Section 37 Arbitration Act. The Supreme Court in Kandla Export Corporation emphasized that the proviso must be harmoniously construed with the main provision and restricts appeals to those orders specifically enumerated.

Court's Interpretation and Reasoning: The Court analyzed the unamended and amended provisions of Section 13 and concluded that the proviso restricts the right of appeal to only those orders specifically enumerated in Order XLIII CPC. The Court emphasized that the legislature's use of "shall" and "specifically" in the proviso indicates a clear legislative intent to restrict appeals.

Application of Law to Facts: Since the impugned order rejecting the Defendants' application under Order VII Rule 10 and Rule 11(d) CPC is not enumerated under Order XLIII CPC, the appeal under Section 13(1A) is not maintainable.

Conclusion: The appeal is barred by the proviso to Section 13(1A) of the Act of 2015 and must be dismissed.

Significant Holdings:

"Sub Section 2 of Section 13 unequivocally provides that any appeal against a decree or order of a Commercial Court or Commercial Division shall lie only in accordance with the provisions of the Act and in view of what has been provided for in sub section 2 of Section 13, the proviso appended to Section 13 assumes importance."

"The proviso specifically states that an appeal shall lie only from orders which are specifically enumerated under Order XLIII of the CPC. The occurrences of the expression 'shall' and 'specifically' in the proviso has to be noted for correctly understanding the legislative intent in framing the scheme of Section 13 of the Act of 2015."

"An order rejecting an Application moved under Order VII Rule 10 or Order VII Rule 11(d) of the CPC is not enumerated or enlisted in Order XLIII of the CPC hence, such an order is not appealable following the law laid down by this court in the case of Skil-Himachal Infrastructure & Tourism Ltd. & Ors."

"The suit filed by the Plaintiff is based on the assertion of fraud and accordingly declaration has been sought along with other reliefs and such a relief as sought by the Plaintiff can be entertained by it, as the jurisdiction of the DRT is confined to hold inquiry and to adjudicate the issues brought before it within the scope of Section 17 of the Recovery Act, 1993."

"Scope of inquiry relating to commission of any alleged fraud by the bankers is outside the scope of Section 17 of the Recovery Act, 1993 and hence, the prayer made by the Defendants in the Application moved under Order VII Rule 10 and Rule 11(d) of the CPC was liable to be rejected."

Final Determinations:

1. The appeal under Section 13(1A) of the Commercial Courts Act, 2015, against the order rejecting the Defendants' application under Order VII Rule 10 and Rule 11(d) CPC is not maintainable as such order is not enumerated under Order XLIII of the CPC.

2. The Civil Court has jurisdiction to entertain the suit filed by the Plaintiff alleging fraud and seeking damages and declaratory reliefs, notwithstanding the pendency of recovery proceedings before the DRT.

3. The DRT's jurisdiction under Section 17 of the Recovery Act, 1993, is limited to recovery of debts and does not extend to inquiry into allegations of fraud by the Defendants.

4. The proviso to Section 13(1A) of the Act of 2015 restricts appeals to only those orders specifically enumerated under Order XLIII CPC and Section 37 Arbitration Act, and this limitation is binding and must be strictly construed.