TMI Blog2005 (12) TMI 287X X X X Extracts X X X X X X X X Extracts X X X X ..... 2003, the bank issued to the petitioners a notice under section 13(2) of the Act calling upon them to pay an amount of Rs. 88,61,830.68 p. The petitioners filed reply to the notice on 18-10-2003 disputing their liability to pay the said amount. They asked for a copy of account and withdrawal of the notice. Thereafter, a notice, dated 28-2-2004, under section 13(4) of the Act was issued calling upon the petitioners to deliver the possession of the secured assets before 6-3-2004 failing which the authorised officer of the bank will take possession of the secured assets on 9-3-2004. The petitioners did not pay any amount. Consequently, a symbolic possession of the said assets was taken on 9-3-2004. On bank s issuing a proclamation for sale of the secured assets, the petitioners filed an appeal/application questioning the said action on the part of the bank. 3.2 Vide impugned letter, dated 11-2-2005 (Annexure P-32), an objection was raised by the Registrar, DRT on appeal/application, demanding court fees of Rs. 91,000. Main challenge in the present writ petition is to this objection. It is pleaded that the demand of court fee is ultra vires, arbitrary, illegal, without jurisdic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reafter, the provisions of the RDB Act were amended by way of an Ordinance. The said Ordinance contemplated the secured creditor to consider the representation or objection raised by the borrowers in response to the notice issued by the secured creditors under section 13(2) of the RDB Act. It also provides for an application before the DRT constituted under the RDB Act against any of the measures taken under section 13(4) of the Act. The said Ordinance was replaced by the Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Act, 2004 (hereinafter to be referred as the Amending Act ). 5.2 In Mardia Chemicals Ltd. s case ( supra ), while upholding the constitutionality of the provisions of the Act, their Lordships of the Supreme Court observed that the remedy contemplated under section 17 of the Act is not appellate proceedings. It is the initial action which is brought before a forum raising grievance against the action or measures taken by one of the parties to the contract. It was found that the proceedings under section 17 of the Act are in lieu of civil suit which remedy is ordinarily available but for bar under section 34 of the Act. Nevertheless, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emicals Ltd. [1991] 6 CLA 90 and S. Shanmugavel Nadar v. State of Tamil Nadu [2002] 8 SCC 361, learned counsel for the petitioner has pressed into service the doctrine of sub silentio. 7. We are unable to agree with the argument that it is still open to the petitioners to challenge the validity of provisions of the Act on the basis of doctrine of sub silentio. In fact, various questions framed by the Supreme Court, particularly question Nos. 4 and 5, make it abundantly clear that the court was seized of the provisions of the Act irrespective of the quantum of debt. As noted above, in paragraph 79 of the report, it has been observed that though some submissions had been made pointing out certain circumstances, but these objections were not such which would render the statute invalid or unconstitutional. True, that the issue in regard to the resolution of problems in the working of any particular provision of the Act in any particular factual situation was kept open to be considered as and when raised, yet we are of the view that insofar as the constitutional validity of any of the provisions of the Act as a whole is concerned, the issue stands concluded. 8. A Full B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red on such Tribunal under the RDB Act in respect of the areas specified in the notification. 11.1 On the basis of such statutory provisions, the argument raised is that the DRT "having jurisdiction" in terms of section 17 of the Act, is the Tribunal constituted for recovery of a debt of Rs. 10 lakhs or more, therefore, in respect of debt due less than Rs. 10 lakhs, the DRT has no pecuniary jurisdiction to entertain an application. In support, reliance was placed on a recent Single Bench decision of Delhi High Court in Civil Revision No. 242 of 2004 titled State Bank of India v. Mukesh Jain decided on 16-4-2005. 12. On the other hand, learned counsel representing the respondents have submitted that the DRT having jurisdiction contemplated under section 17 of the Act deals with only territorial jurisdiction of the Tribunal and not the pecuniary jurisdiction, inasmuch as the pecuniary jurisdiction is contemplated under sub-section (4) of section 1 of the RDB Act. 12.1 The Tribunal constituted exercises jurisdiction over the territory notified in terms of section 3 of the RDB Act. Thus, the DRT having jurisdiction in the matter provided under section 17 of the Act is t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law." RECOVERY OF DEBTS DUE TO BANKS AND FINANCIAL INSTITUTIONS ACT, 1993 "1. Short title, extent, commencement and application. (1)** **** (4) The provisions of this Act shall not apply where the amount of debt due to any bank or financial institution or to a consortium of banks or financial institutions is less than ten lakh rupees or such other amount, being not less than one lakh rupees, as the Central Government may, by notification, specify." 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 recove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has a genus. In the former case the subsequent amendments made in the referred statute cannot automatically be read into the adopting statute. But in the second category it may be presumed that the legislative intent was to include all the subsequent amendments also made from time to time in the generic law on the subject adopted by the general reference. 31. In the former case a modification, repeal or re-enactment of the statute that is referred will also have effect on the statute in which it is referred; but in the latter case, any change in the incorporation statute by way of amendment or repeal has no repercussion on the incorporating statute. The rule that the repeal or amendment of an Act which is incorporated in a later Act has no effect on the later Act or on the provisions incorporated therein is subject to four exceptions. They are : ( i ) where the later Act and the earlier Act are supplemental to each other, ( ii ) where the two Acts are in pari materia, ( iii ) where the amendment of the earlier Act if not imported in the later Act would render it wholly unworkable, and ( iv ) where the amendment of the earlier Act either expressly or by necessary intendment al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e powers conferred on the DRT under the provisions of the Act were over and above that of Tribunal s power conferred under the RDB Act. Therefore, we are of the opinion that the jurisdiction of the DRT under the RDB Act will not have any relevance to determine the question of applicability of the provisions to an application under section 17(1) of the Act. Moreover, as noted above, the Apex Court having upheld the constitutional validity of the Act, it is not open to this Court to re-examine the same matter again. The court is to consider the problems, if any, in the working of the Act. This Court is to iron out the creases and to smoothen the edges so as to make the Act as a working provision of law. 17. In view of the above discussion, we hold that the DRT constituted under me RDB Act would have the jurisdiction to entertain an application contemplated under section 17 of the Act even in respect of the debt of less than Rs. 10 lakhs. Question No. 3 18. By virtue of the amending Act with effect from 11-11-2004, the persons aggrieved against the action of the bank or financial institution initiated under section 13(4) of the Act have a right of adjudication by way of an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) of the Act. It is asserted that in terms of clause 3 of the said order, the provisions of 1993 Rules are applicable mutatis mutandis to an application even after the amendment. In support, reliance is placed on a Division Bench judgment of Madras High Court in CWP No. 13056 of 2005 titled Digivision Electronics Ltd. v. Indian Bank [2005] 68 CLA 242 2 (Mad.), decided on 7-7-2005, wherein it has been held that ad valorem court fee as required under rule 7 of 1993 Rules is payable. The learned counsel has placed reliance on Raj Kumari Amrit Kaur v. Maharani Deepinder Kaur [2001-3] 129 PLR 808; Om Parkash v. Inderawati [2002-2] 135 PLR 853 and Ranjit Singh v. Balkar Singh [2000-2] 125 PLR 382, to contend that in case of suit where the relief is not merely of declaration but is consequential relief, ad valorem court fee is required to be paid. Alternatively, it was argued that the provisions of section 17(1) of the Act can be read down to provide a different fee for a person other than the borrower to avoid hardship to such persons. 20. To appreciate the rival stands, we may notice a few relevant statutory provisions. These are : THE SECURITISATION AND ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such rules may provide for all or any of the following matters, namely:-.... ****** ( ba )the fee for making an application to the DRT under sub-section (1) of section 17; ( bb )the form of making an application to the Appellate Tribunal under sub-section (6) of section 17; ( be )the fee for preferring an appeal to the Appellate Tribunal under sub-section (1) of section 18." SECURITISATION AND RECONSTRUCTION OF FINANCIAL ASSETS ENFORCEMENT OF SECURITY INTEREST (REMOVAL OF DIFFICULTIES) ORDER, 2004 "3. Fee for filing of an appeal to DRT. - The fee for filing an appeal to the DRT under sub-section (1) of section 17 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, shall be mutatis mutandis as provided for filing of an application to the DRT under rule 7 of the DRT (Procedure) Rules, 1993." 21. Prior to the amendment of the Act on 11-11-2004, section 17 of the Act provided a right of appeal to any person including the borrower aggrieved by any of the measures, referred to in sub-section (4) of section 13 of the Act, taken by a secured creditor. Sub-section (3) contemplated disposal of the said appeal in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act, validating the levy and collection of fee before the commencement of the amending Act itself shows that the order issued by the Central Government on 6-4-2004 has not been validated or incorporated in the statute. It is only collection of fee in pursuance of such order which has been validated. In the absence of such validation, perhaps, the court fee has to be refunded. 23. The other judgments referred to by learned counsel for the respondents have no applicability to the facts of the present case. They deal with the provisions of section 7( iv )( c ) of the Court Fees Act, 1870, in respect of suits before a civil court. In the instant situation, firstly, the action is not before a civil court. Secondly, the relief is not for any declaration with or without, consequential relief. The challenge is to the action taken by the secured creditor by way of an application before an adjudicating authority. There is no gain saying that the scope of dispute before a civil court is materially different from the scope of an adjudication by the Tribunal on an application filed by a person aggrieved against the action of the authorised officer. It is not within the domain of this Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the banks or financial institutions cannot be permitted to avail of the remedy under the Act when they have already invoked the jurisdiction of RDB Act for a debt of Rs. 10 lakhs or more and of civil court for an amount less than Rs. 10 lakhs but over Rs. 1 lakh. It is urged that sub-section (10) of section 13 of the Act gives liberty to the banks or financial institutions, if the dues of the secured creditors are not fully satisfied with the sale proceeds of the secured assets, to avail the remedy of DRT having jurisdiction or in a competent court, as the case may be, for recovery of the balance amount from the borrower. It is, thus, contended that the remedy contemplated under the RDB Act is only in the case of shortfall, i.e., after the sale proceeds of the secured assets have been accounted for. It is asserted that once the proceedings under the RDB Act or in the civil court have been initiated, the banks or the financial institutions cannot initiate proceedings under the Act without withdrawing or abandoning the proceedings under the aforesaid provisions of law. 27. Reference is also made to proviso to section 19 of the RDB Act which provides that the banks or fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es not affect any of the rights of the borrower as the DRT has the jurisdiction to pass an appropriate order in terms of sub-section (25) of section 19 of the Act, even if such proceedings are filed and/or are pending. In exercise of such jurisdiction, the DRT can stay further proceedings in respect of an application filed by the bank for recovery of the amount. Even in case of shortfall of the amount recovered under the Act, the banks or the financial institutions have to invoke the jurisdiction of the RDB Act in terms of section 13(10) of the Act. Therefore, the provision has to be harmoniously construed and mere pendency of application before the DRT will not bar the banks or financial institutions to seek their remedy under the Act. To buttress the argument, reliance is also placed on a Division Bench judgment of the Kerala High Court in Abdul Azeez v. Punjab National Bank [2005] 65 CLA 217 1 , wherein it has been held that the provisions of the Act are in addition to and not in derogation of other laws. It was found that remedy under the Act is an additional remedy which, unless barred by the statute can be enforced at any time. It is argued that the doctrine of election ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rity Interest Act, 2002 (54 of 2002), if no such action had been taken earlier under that Act : Provided further that any application made under the first proviso for seeking permission from the DRT to withdraw the application made under sub-section (1) shall be dealt with by it as expeditiously as possible and disposed of within thirty days from the date of such application : Provided also that in case the DRT refuses to grant permission for withdrawal of the application filed under this sub-section, it shall pass such orders after recording the reasons therefor." 32. The doctrine of election is a rule of estoppel. It is an obligation imposed upon a party by the court of equity to choose between two inconsistent or alternative rights or claims. This principle stated in White and Tudor s Leading Cases in Equity Volume 18th edn., at p. 444, was quoted with approval by the Supreme Court in a judgment of C Beepathumma v. Velasari Shankaranarayana Kadambolithaya AIR 1965 SC 241. It was to the following effect: - 17. The doctrine of election which has been applied in this case is well-settled and may be stated in the classic words of Maitland - "That he who accept ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cretion of the workman to either resort to the ordinary Jurisdiction of the civil court or to seek remedies under the Industrial Disputes Act. He must distinctly elect his remedy. He is to choose one or the other. The court concluded to the following effect: - "10. Coming now to the second distinct category where the right or obligation giving rise to the industrial dispute springs from a source other than the Act, that is, under the general law (including therein any other statutes) then under principle (2) the workman is expressly given two alternative remedies. In such a case, it is in his discretion to either make resort to the ordinary jurisdiction of the civil courts or to seek the remedies under the Act. However, he must distinctly elect his remedy. It is now authoritatively settled that he cannot have both. He is to choose one or the other." 35. It is not in dispute that the Act provides for a remedy to the bank or the financial institution to recover its debts restricted to secured assets. The proceedings under the RDB Act are not only in respect of the secured assets but against the person as well. Therefore, in respect of secured assets, the bank or the financial i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e word may and then if no such action had been taken earlier under that Act . The use of word may does not make the proviso directory. It is in the discretion of the bank or the financial institution to withdraw the application or not. Once, the Bank decides to proceed under the Act, the Act imposes an obligation on the bank or the financial institution to withdraw an application under section 19 of the RDB Act. 38. The first proviso to section 19 gives statutory recognition to the doctrine election which contemplates that one remedy can be taken in respect of one action. Such intention can be gathered from para 6 of the Statement of Objects and Reasons as well as from the provisions of sub-section (10) of section 13 of the Act which contemplates filing of an application for recovery of the shortfall after secured assets in terms of the Act has been realised. The second and the third provisos to section 19 of the RDB Act also contemplate an expeditious decision on an application for withdrawal of the application made under the provisions of section 19(1) to enable the bank to have action under the Act. Thus, we hold that though it is discretionary for the Bank to proceed u ..... 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ECURITISATION AND RECONSTRUCTION OF FINANCIAL ASSETS AND ENFORCEMENT OF SECURITY INTEREST ACT, 2002 "13.(4) In case the borrower fails to discharge his liability in full within the period specified in sub-section (2), the secured creditor may take recourse to one or more of the following measures to recover his secured d ebt, namely: - ( a )take possession of the secured assets of the borrower including the right to transfer by way of lease, assignment or sale for realising the secured asset; ( b )take over the management of the business of the borrower including the right to transfer by way of lease, assignment or sale for realising the secured asset : Provided that the right to transfer by way of lease, assignment or sale shall be exercised only where the substantial part of the business of the borrower is held as security for the debt : Provided further that where the management of whole of the business or part of the business is severable, the secured creditor shall take over the management of such business of the borrower which is relatable to the security for the debt; ( c )appoint any person (hereafter referred to as the manager), to manage the secured assets ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, expenses and interest as may be determined by him. (8) On such deposit of money for discharge of encumbrances, the authorised officer may issue or cause the purchaser to issue notices to the persons interested in or entitled to the money deposited with him and take steps to make the payment accordingly. (9) The authorised officer shall deliver the property to the purchaser free from encumbrances known to the secured creditor on deposit of money as specified in sub-rule (7) above. (10) The certificate of sale issued under sub-rule (6) shall specifically mention that whether the purchaser has purchased the immovable secured asset free from any encumbrances known to the secured creditor or not." 42. The right to move an application under section 17 of the Act accrues to any person aggrieved by any of the measures referred to in sub-section (4) of section 13 of the Act. Sub-section (4) of section 13 of the Act empowers the secured creditor to take possession of the secured immovable assets of the borrower after the expiry of 60 days of notice served under section 13(2) of the Act. In many cases, the bank or the financial institutions have taken actual physical possession o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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