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Elements Coke Pvt. Ltd. Versus UCO Bank

2009 (7) TMI 1332 - CALCUTTA HIGH COURT

C.O. No. 3372 of 2008 With C.A.N. 2980 of 2009 - Dated:- 16-7-2009 - Mr. Jyotirmay Bhattacharya, J. Mr. Ajoy Krishna Chatterjee, Mr. Aniruddha Roy, Mr. Somnath Saha, Ms. Sudeshna Bagchi. For the Petitioner Mr. Sabyasachi Chowdhury And Mr. Soumen Das For the Respondent JUDGMENT: Jyotirmay Bhattacharya, The following issue has been raised in this Revisional Application before this Court for its consideration :- Whether the Debt Recovery Tribunal (DRT) at Calcutta has jurisdiction to entertain an a .....

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very Tribunal at Calcutta for redressal of its grievances arising out of the action taken by the bank (secured creditor) under Section 13(4) of the said Act, as according to the petitioner, part of the cause of action has arisen within the territorial jurisdiction of the said Tribunal. The part of the cause of action which according to the petitioner arose within the jurisdiction of the said Tribunal, are as follows :- 1. Pursuant to the request made by the petitioner, UCO Bank, Ashram Road Bran .....

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t proposal on 7th November, 2003 subject to the terms and conditions enclosed in Annexure "2" with its memorandum dated 29th October, 2003. The said letter dated 13th November, 2003 was issued from the head office of the bank which is situated within the jurisdiction of the Tribunal at Kolkata. 3. Ashram Road Branch of the said bank issued a notice on 3rd March, 2006 under Section 13(2) of the said Act alleging that the petitioner committed default in payment of its dues as per the ter .....

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ved by the branch of the said bank at Ahamedabad. 4. Since the said representation was not considered by the said bank, a writ petition being W.P. No.13158(w) of 2006 was moved by the petitioner before this Hon'ble Court and the said writ petition was ultimately disposed of on 25th May, 2006 after a contested hearing by granting liberty to the bank to take appropriate steps in accordance with law to protect its interest and directing the bank to consider the said representation of the petiti .....

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a notice for taking possession of the factory, plant and assets of the petitioner situated at Ahamedabad and the copy of the said possession notice was also served upon the petitioner at its registered office at Lord Sinha Road within the jurisdiction of the Tribunal. 7. Challenging the said action of the bank, the petitioner on or about 22nd June, 2006 filed an application under Section 17 of the said Act before the learned DRT-1 at Kolkata. An interim order of injunction was passed by the said .....

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part of the integral part of the cause of action for the said application had arisen within the territorial jurisdiction of the said Tribunal. The sum and substance of the contention of the bank regarding the lack of territorial jurisdiction of this Tribunal to entertain the said application is as follows :- 1. Though notice under Section 13(2) of the SARFAESI Act is a condition precedent before measures under 13(4) of the said Act can be taken but it does not form an integral part of the cause .....

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e SERFASIE Act accrues only after measures are taken under sub-section (4) of Section 13 of the said Act. As such, service of notice of Section 13(4) of the said Act forms an integral part of the cause of action to approach the Debt Recovery Tribunal under Section 17 of the said Act. 3. Measures under Section 13(4) of the SARFAESI Act deals with enforcement of security interest only and therefore, any proceeding of this nature arising out of the enforcement action has to bear co-relation with te .....

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ce at Ashram Road Branch at Ahamedabad. 5. Similarly, (i) service of notice under Section 13(2) of the said Act upon the petitioner at its registered office at Kolkata and/or (ii) sending of representation from the registered office of the petitioner and/or (iii) receipt of the communication of the bank's decision from its Ashram Road Branch by the petitioner at its registered office address at Kolkata and/or (iv) service of notice under 13(4) of the said Act upon the petitioner at its regis .....

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Kolkata had entertained and disposed of the writ petition filed by the borrower despite objection of the creditor bank that the High Court at Kolkata had no territorial jurisdiction to entertain the same. Thus, the objection regarding lack of territorial jurisdiction of the Tribunal to entertain the petitioner's application under Section 17 of the said Act which was raised by the opposite party bank, was not accepted by the said Tribunal. The bank was aggrieved against the said order. As su .....

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unal was of the view that grant of formal sanction of the loan by head office of the creditor bank at Kolkata and/or service of some of the notices at the registered office of the borrower at Kolkata did not constitute an integral part of the cause of action. According to the learned Appellate Tribunal, since the borrower was granted loan on credit facilities on certain terms and conditions by Ashram Road Branch of the creditor bank and since immovable properties situated in the State of Gujarat .....

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Debt Recovery Appellate Tribunal, Kolkata is under challenge in this application under Article 227 of the Constitution of India before this Court. Heard Mr. Chatterjee, learned Counsel, appearing for the petitioner and Mr. Chowdhury, learned Counsel, appearing for the opposite party. considered the materials-on-record including the order impugned. Let me now consider the merit of this revisional application with reference to the question as formulated above. Jurisdiction of the Tribunal is dealt .....

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within local limits of whose jurisdiction - (a) the defendant, 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." The said .....

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fact which, it traversed it would be necessary for the plaintiff to prove in order to support his right to a judgment of the Court or in other words it is a bundle of facts which taken with the law applicable to them gives the plaintiff a right to relief against the defendant. It must include some act done by the defendant since in the absence of such an act no cause of action can possibly accrue. It is not limited to the actual infringement of the right sued on, but includes all the material fa .....

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actions constitute integral part of the cause of action of the present application? For ascertaining what are the acts and/or action which constitute the integral part of the cause of action, this Court is required to consider the following two decisions of the Hon'ble Supreme Court on which the learned Counsel of both the parties placed strong reliance: 1. In the case of Mardia Chemicals Ltd. -Vs- Union of India reported in (2004)4 SCC 311. 2. In the case of M/s. Transcore -Vs- Union of In .....

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he said Act makes it clear that the right to apply under Section 17 of the said Act matures only when any measure referred to in Section 13(4) is taken by the secured creditor or his authorised officer. According to Mr. Chowdhury, the aforesaid provision makes it clear that though action under Section 13(4) of the said Act can be taken preceded by service of notice under Section 13(2) of the said Act upon the borrower but, still then, restriction has been imposed upon the right of the borrower t .....

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n 13(4) of the said Act. Mr. Chowdhury submitted that the spirit of the provision contained in Section 13(4) shows that the proceeding contemplated therein is akin to execution proceeding and in the instant case expression action is to be construed as a suit or a legal proceeding which has already commenced as per Section 13(4) of the said Act in Gujarat where the secured assets which are sought to be sold in execution, are lying. According to Mr. Chowdhury, the expression "action" use .....

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garwal reported in AIR 2007 Calcutta 148 that mere fact that the regional office is situated within does not give jurisdiction to this Tribunal as each Branch of a bank is a separate entity. Thus, Mr. Chowdhury supported the judgment passed by the learned Appellate Tribunal. In my view, sanction of the loan proposal either from the bank in its Head office at Calcutta or from its branch office at Ahamedabad does not form part of the integral part of cause of action. As such, this part of the cont .....

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ain is not complete without (1) service of notice under Section 13(2) of the said Act, (2) consideration of the borrower's representation by the creditor bank, (3) communication of its decision on the said representation and in addition thereto, (4) the measures to be taken under Section 13(4) of the said Act. Thus, according to Mr. Chatterjee if any part of the said chain is taken out of the said chain, the chain will be snapped. As such, Mr. Chatterjee submitted that service of notice unde .....

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ction 17 of the said Act, this Court is required to take note of provision contained in Section 13(2), Section 13(3A), Section 13(4) and Section 17(1) of the said Act read with Section 19 of the DRT Act. If the aforesaid provisions are taken into consideration, then this Court finds that the entire realisation process is divided in two phases. The first phase of such process commences with service of demand notice and/or show cause notice under Section 13(2) of the said Act upon the borrower. On .....

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he borrower as per Section 13(3A) of the said Act. The proviso to Section 13(3A) of the said Act provides that such communication of the secured creditor's decision to the borrower will not confer any right upon the borrower to approach the Tribunal/Court for challenging the correctness of such decision. Thus, the decision of the secured creditor becomes final and conclusive so far as the legality and/or conclusiveness of such demand as assessed by the secured creditor. This is the end of th .....

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ithin sixty days from the date of notice, with a rider that failing compliance of such notice, the creditor will exercise all or any of the rights under sub-section (4) thereof. Details of the demand should be indicated in the notice. 3. Borrower may submit his representation to the secured creditor raising his objection to such demand. 4. Secured creditor will have to consider the said representation and come to a decision with regard to the objection raised by the borrower in his representatio .....

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when the secured creditor takes recourse to one or more of the measures as specified in sub-section (4) of Section 13 thereof, for recovery of secured debts. Once such step is taken by the secured creditor, a fresh cause of action arises for challenging the said action of the secured creditor to Tribunal/Court, as the case may be, as per Section 17 of the said Act. If this part of the scheme of the Act is examined then it goes without saying that failure to discharge the liability by the borrow .....

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examine its records for ascertaining as to whether the borrower has discharged his liability or not. In case it is found that the borrower has failed to discharge his liability, then steps for realisation is to be taken by sale of the secured assets, which admittedly in the instant case situate at Ahamedabad beyond the territorial jurisdiction of the DRT Kolkata. On examination of the scheme of the said Act particularly Section 13 thereof, this Court has no hesitation to hold that the measures p .....

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urisdiction can be invoked for filing an application under Section 17 of the said Act as the cause of action for the second phase of this chapter wholly arises within the jurisdiction of the said Tribunal. Mere service of notice under Section 13(2) of the said Act, and/or communication of the decision of the secured creditor to the borrower at its registered office at Kolkata, though may form part of the cause of action, however, insignificant it may be, but these parts of the cause of action do .....

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