1
Mgn
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
NOTICE OF MOTION NO.2332 OF 2007
IN
SUIT NO.1627 OF 2007
WITH
NOTICE OF MOTION NO.2983 OF 2007
IN
SUIT NO.1627 OF 2007
Hill Properties Ltd. )
an existing company within the )
meaning of the Companies Act,1956 )
and having its registered office )
at Hill Park Estate,A.G.Bell Road )
Malabar Hill, Mumbai-400 006. )..Plaintiffs
Vs.
1.Union Bank of India )
a body corporate constituted )
under the Banking Companies )
Acquisition of Transfer of )
Undertakings) Act, 1970 having )
its head office and Bombay Main )
Office at Union Bank of India )
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2
Bhavan, Backbay Reclamation )
Nariman Point, Bombay-400 021. )
2.Mitsan Chemicals and Allied )
Products Pvt. Ltd., a Company )
duly registered under the )
Companies Act, 1956 having its )
Registered office at NearBasant )
Pictures,Dr.Chhoitram Gadwaney )
Road, Chembur, Bombay-400 074. )
3.Mr. Mitesh Desai of Mumbai, )
Indian Inhabitant residing at )
NearBasant Pictures,Dr.Chhoitram)
Gadwaney Road, Chembur, )
Bombay-400 074. )
4.Mrs. Aruna Desai, of Mumbai )
Indian Inhabitant, residing at )
Near Basant Pictures,Dr. )
Chhoitram Gadwaney Road,Chembur )
Bombay-400 074. )
5.French Dyes & Chemicals (India) )
Limited., a company duly )
registered under the Companies )
Act, 1956 having its registered )
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3
office at 109-D, Sion Matunga )
Industrial Estate, Sion East, )
Mumbai-400 022. )
6.Shri Shankar Cyanamide Co- )
Polymers Pvt. Ltd., )
a Company duly registered under )
the Companies Act, 1956 having )
its registered office at Soman )
House, Dr. C.G. Road, Chembur, )
Vadavali, Mumbai-400 074. )
7.Gill & Company Limited, a )
Limited Company incorporated )
Under the provisions of the )
Companies Act, 1956 and having )
its registered office at N.T.C. )
House, Narottam Morarjee Marg, )
Ballard Estate, Mumbai-400 038. )
8.The Recovery Officer, DRT II, )
Mumbai having his office at 5th )
Floor, Scindia House, N.M. Marg)
Ballard Estate, Mumbai-400 038. )
9.Asset Reconstruction Company )
(India) Limited, a Company )
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4
incorporated under the Companies)
Act, 1956 as trustee of )
Arcil -SBPS -0261 Trust having )
its registered office at )
Shreepati Arcade, August Krant )
Marg, Nana Chowk, Mumbai-400036 )..Defendants
Mr. M.S. Doctor and Nimay Dave i/b. Bachubhai
Munim & Co., for the Plaintiffs
Mr. V.R. Dhond with Mr. Vinod Kothari i/b. Apex
Law Partners, for Defendant No.9.
Mr. P.C. Mankad with Mr. Pravin D. Kadam, for
Defendant Nos. 3 and 5.
Mr. Avinash Joshi with Mr. Vipul Bilve and Mr.
K. Tamhane i/b. Mulla & Mulla for Defendant No.
7.
CORAM : F.I. REBELLO &
D.G. KARNIK, JJ.
JUDGMENT RESERVED ON:4TH AUGUST. 2009
JUDGMENT PRONOUNCEDON:16TH OCTOBER,2009
JUDGMENT (PER FERDINO I. REBELLO, J.):
A learned single Judge of this Court
noticing an apparent conflict with the views
taken in Keshrimal J. Shah vs. Bank of India,
2004 (4) Bom. C.R. 842, the judgment in Dr. Anil
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5
Nandkishor Tibrewala vs. Jammu & Kashmir Bank
Ltd., & Ors., in Writ Petition No.1684 of 2006
decided on 11th July, 2006 on the one hand, and
the view taken in Sarvadaman M. Joshi & Ors. vs.
The Recovery Officer & Ors., Writ Petition No.
5405 of 2005, accordingly directed the Registry
to place the matter before the learned Chief
Justice under Rule 28 of the Rules of the High
Court of Judicature, Bombay, Original Side, for
consideration by a Larger Bench. The questions
referred are :-
1.Whether in view of the provisions of
Section 29 of the Recovery of Debts
Due to Banks and Financial
Institutions Act, 1993 read with Rules
11(1) and 11(6) of the, Second Schedule
of the Income Tax Act, 1961 a person
against whom an order is passed is entitled
to institute a suit in a civil Court,
or whether the said order can only
be challenged by way of an
Appeal under Section 30 of the Act ?
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6
2.Whether the provisions of Section 29 of
the Recovery of Debts Due to Banks and
Financial Institutions Act, 1993 are only
restricted to those cases in which the
property of the judgment debtor is sought
to be recovered in terms of Rule (4) of the
second schedule of the Income Tax Act,
1961 ?
3.What is the remedy available to a
party, who is not a party in proceedings
before the Debts Recovery Tribunal,
but, whose property has been declared by
the Tribunal to be validly mortgaged in
favour of a financial institution ?
2. The main question which we are called upon
to answer is whether in fact there is a conflict
in the views taken in the judgments referred to.
3. We may firstly refer to the judgment in
Keshrimal J. Shah (supra). Bank of
Maharashtra had filed a suit in this Court
which on coming into force of the provisions of
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7
the Recovery of Debts Due to Banks and
Financial Institutions Act, 1993 (hereinafter
referred to as the RDB Act) was transferred to
the Tribunal constituted under the RDB Act. The
Original Application was decreed ex-parte and in
consequence thereof a recovery certificate was
issued by the Tribunal. The bank had earlier
obtained a temporary injunction restraining the
original defendant from alienating or
transferring the immovable property. Inspite of
the injunction, the respondent No.2 therein
transferred the rights in favour of the
petitioner No.2 therein which document was
registered on 29th August, 2000. It was the
case of the petitioners that on coming to know
on 8th October, 2000 that the property was put
up for auction by Recovery Officer of D.R.T. –
II, Mumbai,they moved an Application for
intervention which was heard by the Recovery
Officer and rejected. An appeal was preferred
which was dismissed. The petitioners preferred
Misc. Appeal before the Debt Recovery Appellate
Tribunal (DRAT). That appeal was dismissed.
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8
Against that order a Writ Petition came to be
filed before this Court. The learned Judge took
a view that the transfer was void being in
contravention of the order of injunction dated
6th March, 1998 and also that the petitioners had
failed to substantiate by proof, that they are
bonafide purchasers without notice. This order
was challenged before the Appellate Bench of
this Court. This Court framed two questions
for consideration, which were:-
“(i) Is transfer of an immovable property in
contravention of a prohibitory or
injunction order of a Court illegal or void;
(ii) Whether and to what extent, the
procedure under Rule 11 of Second Schedule
to Income Tax Act, 1961 is applicable in
execution of a recovery certificate issued
under Section 19(7) of the Recovery of
Debts Due to Banks and Financial
Institutions Act, 1993 (for short RDB
Act).”
The learned Bench answered the 1st question in
the affirmative and thereafter went on to
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9proceed to answer the second question. In
answering the second question this is what the
learned Bench observed:-
“The Parliament does not make it mandatory
nor compulsory for the Recovery Officer to
apply the Second and Third Schedule of I.T.
Act and 1962 Rules, advisedly because the
Legislature has provided safeguards after
investigation of claims and obligations by
Recovery Officer. This investigation can be
challenged in appeal under Section 30 of the
Act, which has been substituted with effect
from 17th January, 2000. Even proceedings
in such appeal are not final because section
20 of R.D.B. Act provides for a further
appeal by person aggrieved against any order
made or deemed to have been made by a
Tribunal under R.D.B. Act. Such an appeal
lies to the Debt Recovery Appellate
Tribunal. To compel banks or financial
institutions to either institute or defend
proceedings after all this before a Civil
Court is defeating and frustrating the
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10Legislative Intent completely.
Investigation and adjudication cannot be
endless. That apart, the remedy to approach
this Court in appropriate cases by invoking
its jurisdiction under Articles 226 and 227
of the Constitution of India is always
available. Hence, question No.2 is answered
in these terms that it is not obligatory to
apply Second and Third Schedule of I.T. Act
and 1948 Rules while investigating a claim
or objection to attachment and sale during
the course of execution of recovery
certificate under R.D.B. Act.”
Thus, the Court did not hold that the
jurisdiction of the Civil Court was barred but
held that it is not obligatory to apply the
Second and Third Schedule of I.T. Act and 1948
(1961)Rules, while investigating a claim or
objection to attachment and sale during the
course of execution of the recovery certificate
under the R.D.B. Act.
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114. We next examine the judgment in Dr. Anil
Nandkishor Tibrewala (supra). The petitioner
therein had moved the D.R.T. under the
provisions of Section 19(25) of the R.D.B. Act.
The Jammu & Kashmir Bank Ltd., had taken out
proceedings before D.R.T., against the
respondent Nos. 2 to 10 in O.A. No.305 of 2002.
That application was allowed which included a
prayer that Flat No.902 was validly mortgaged in
favour of Jammu and Kashmir Bank Ltd. A further
direction granted was that on failure to pay the
amount to the bank the bank was entitled to sell
the flat. The Recovery Officer issued a
certificate. The Jammu and Kashmir Bank moved an
application for enforcement of recovery
certificate by way of attachment of flat No.902.
That application as allowed. The petitioners
had applied for stay of attachment, which was
not considered and consequently the petition.
An Appeal was filed by the petitioners
challenging the order dated 30th May, 2006 passed
by the Recovery Officer. This Court framed the
following questions for consideration:-
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12“What is the remedy available to a party,
who is not a party in proceedings before
the Debts Recovery Tribunal, but, whose
property has been declared by the
Tribunal to be validly mortgaged in favour
of a financial institution?
After considering the scheme of the Act, this
Court arrived at a finding that in a case like
that before it, the remedy under Section 20
would not be an effective remedy. The remedy
under Section 30 in a case where deduction was
raised would be an elusive and non-effective
remedy. Section 29 in that case was held not to
be available to a party. This Court posed a
further question as to whether the Act provides
a remedy to a person like the petitioner. In
that context the Court observed that if a remedy
is not available under the Act a party may have
a remedy at Civil Court. This Court then
considered Section 19(25) of the RDB Act which
reads as under:-
“19(25. The Tribunal may make such orders
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13and give such directions as may be
necessary or expedient to give effect to
its orders or to prevent abuse of its
process or to secure the ends of justice.”
After considering this provision this Court
observed that in those cases where the Recovery
Officer cannot go beyond the certificate a party
like the petitioner who claims title in the
property or interest in the property can move
the Tribunal by invoking its jurisdiction under
Section 19(25), and in such cases if a prima
facie case is disclosed before the Tribunal, the
Tribunal is bound to consider the application so
moved and dispose it according to law, after
giving an opportunity to all parties before it.
This Court in view of the nature of the
proceedings taken out did not consider the
provisions of Section 29 of the RDB Act, as what
was being considered was, whether there was
power under Section 19(25) of the R.D.B. Act.
This judgment has also not taken the view that
the jurisdiction of the Civil Court is barred.
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14This Court specifically noted that it will not
be open to the Investigating Officer in
execution to go beyond the Certificate. In
other words in proceedings in execution it was
not open to the Executing Officer to go into the
merits of the order passed by the Tribunal. This
Court did not take a view that in proceedings
in execution under second and third schedule of
the I.T. Act and 1961 Rules against the order
of the Recovery Officer rejecting an objection
in execution a Civil Suit could not be filed by
the objector.
4. The third Judgment for consideration is in
the case of Sarvadman M. Doshi (supra). The
issue before this Court in the Writ Petition was
an order by the Recovery Officer confirming
sale of plant and machinery in execution of the
recovery certificate and orders passed by D.R.T.
, and by the Appellate Tribunal in Appeal. In
that case the Bank of India had instituted a
suit for recovery of dues against a company by
the name of Mansukh Industries Ltd. That
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15company was ordered to be wound up by order
dated 20th December, 1999, and the Official
Liquidator took the possession of the property
on 18th January, 2001. On 9th May, 2001 the
application filed by the bank was allowed in the
sum of Rs.13,31,71,362/- together with interest
at the rate of 18% per annum. The Tribunal held
that the bank was entitled to execute the decree
by the sale of movable and immovable assets as
they held a valid charge which was registered
with the Registrar of Companies in 1994. In
execution of the recovery certificate, a warrant
of attachment was issued on 31st August, 2002 in
respect of the properties. The plant and
machinery were put up for sale, which was
confirmed on 9th March, 2005. The possession was
handed over to the respondent in that petition.
Appeal filed by the petitioners was dismissed.
That order was confirmed by the Appellate
Tribunal. While considering the issue as to
whether this Court should exercise its extra
ordinary jurisdiction this Court noted that in
view of the provisions of law that held the
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16field, the remedy which is available to the
petitioner is to institute a suit challenging
the sale of the plant and machinery. This Court
considered the provisions of the Second and
Third Schedules to the Income Tax Act, 1961 and
the Income Tax (Certificate Proceedings) Rules,
1962. This Court further observed that the view
formed in regard to the necessity of relegating
the petitioners to the institution of a suit is
supported in the facts of the case as well, by
the nature of the controversy which arose
between the parties. The petitioners contention
was that the property did not belong to the
company in liquidation but constituted the
assets of the partnership. Though the
petitioner had filed the objections before the
Recovery Officer for raising the warrant of
attachment the property came to be sold without
the objections being dealt with. Considering
the controversy as to the title to the property
and the nature of the evidence that would have
to be adduced this Court took the view that it
would be a fit case where liberty be granted to
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17institute a suit in the Court of Competent
jurisdiction. This Court, therefore, took the
view that from proceedings in execution
rejecting the claim of the objector, such party
could file a suit for determining his title to
the property.
6. With that background let us now consider
the arguments advanced at the bar on behalf of
the parties to answer the question raised. On
behalf of the plaintiffs it is submitted that
there is no finding in any of the judgments
Keshrimal T. Shah (supra) or Dr. Anil Nandkishor
Tibrewala (supra)to the effect that third party
whose property has been declared by the D.R.T.
to be validly mortgaged in favour of a bank
and/or financial institution and properties
attached and sold in execution, from an order
rejecting his objections are prevented or
precluded by any provisions contained in the
R.D.B. Act from filing a suit in the Civil Court
to enforce his rights with regard to such
property and as such there is no conflict
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18whatsoever in the view taken by the aforesaid
judgments. Learned Counsel has placed reliance
on the judgment of the Supreme Court in
Dhulabhai vs. State of Madhya Pradesh & Anr.,
AIR 1969 S.C. 78 and the judgment in Raja Ram
Kumar Bhargava vs. Union of India, (1988) 1
S.C.C., 681. Reference is then made to the
provisions of Sections 17 and 18 of the R.D.B.
Act to contend that the bar of jurisdiction as
set out under Section 18 applies only to
application from banks and financial
institutions for recovery of dues of such banks
and financial institutions. It is also pointed
out that Rule 11(6) of the Second Schedule of
the Income Tax Act by reference has been
incorporated into the R.D.B. Act. The R.D.B.
Act has expressly reaffirmed the right of such
third party to institute a Civil Suit to
establish his right to the property and making
the orders passed by the Recovery Officer
subject to the result of such suit. For the
scope of Rule 11(6) reliance is placed on the
judgment in Tax Recovery Officer II, Sadar,
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19Nagpur vs. Gangadhar Vishwanath Ranade, (1998) 6
SCC 658 where the Court observed that the
procedure there is not meant to decide
intricate questions of law as to title to the
property. Our attention is also invited to the
judgment in Allahabad Bank vs. Canara Bank
and Anr., (2000) 4 SCC 406, to contend that the
judgment nowhere has taken the view that the
jurisdiction of Civil Court has been ousted. It
is, therefore, pointed out that the suit as
instituted by the Plaintiffs is maintainable and
the jurisdiction of the Civil Court is not
expressly barred.
7. On the other hand on behalf of the
Defendant No.1-Union Bank of India their learned
Counsel has made the following submissions:-
Such a suit in law is barred as the
jurisdiction of the Civil Court is expressly
and/or by necessary implication or impliedly
excluded. The R.D.B. Act, is a self contained
Code which provides a remedy for such persons
and ousts the jurisdiction of the Civil Courts
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20to entertain such suits. The R.D.B. Act, is a
common code for adjudication and recovery of
debts due to banks and financial institutions
and for matters connected therewith or
incidental thereto. Considering the provisions
of RDB Act one important fact has to be
appreciated is that the Civil Court in
exercising jurisdiction will have to hold that
the declaration, by the Tribunal of the factum
of a mortgage, was erroneous. The only and
inevitable consequence of holding that such a
civil suit can lie, is to permit a civil court
to review the correctness of the decision of the
Debt Recovery Tribunal.
The learned Counsel has also taken us
through the statement of Objects and Reasons of
the RDB Act 1993 and the Amendment Act of 1991
and placed reliance on the judgment in Allahabad
Bank (supra) to contend that the jurisdiction
of the Civil Court is clearly excluded.
It is next submitted that the arguments
advanced on behalf of the Plaintiffs does not
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21take into consideration the specific provisions
of Section 17 or 18 of the RDB Act. The claims
of third parties, it is submitted, considering
the judgment of this Court in Dr. Anil
Nandkishor Tibrewala (supra) would be under the
RDB Act and this Court whilst interpreting the
provisions of Rule 11(6) will have to take into
consideration the serious consequences or
mischief that will follow if a view is taken
that the orders of the Tribunals are left open
for challenge before the Civil Court. Even in
respect of objections raised by third party an
appeal would lie, as the nature of the
objections would be to the mode of recovery.
8. In answering the issue we will have to
consider the provisions of the RDB Act including
Section 29 which by incorporation has made
applicable the provisions of the Second and
Third Schedules to the Income Tax Act as also
the Income Tax (Certificate Proceedings) Rules,
1962 as in force from time to time. These
provisions , shall as far as possible apply with
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22modifications as if the said provisions
referred to a debt due under this Act instead of
Income Tax Act.
9. To understand the various contentions, let
us firstly consider the background to the
enactment of the RDB Act, 1993 and the Amendment
Act 1 of 2000. The Act as its preamble
discloses seeks to provide for the establishment
of Tribunals, for expeditious adjudication and
recovery of debts due to Banks and Financial
Institutions. We may gainfully refer to the
Statement of Objects and Reasons of the RDB Act,
which read as under:-
“Statement of Objects and Reasons:-
1.Banks and financial institutions at
present experience considerable
difficulties in recovering loansand enforcement of securities
charged with them. The existing
procedure for recovery of debts due
to the bans and financial
institutions has blocked a
significant portion of their funds
in unproductive assets, the value
of which deteriorates with the
passage of time. The Committee on
the financial system headed by Shri
M. Narasimham has considered the
setting up of the Special Tribunals
with special powers for
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23adjudication of such matters and
speedy recovery as critical to the
successful implementation of thefinancial sector reforms. An
urgent need was, therefore, felt towork out a suitable mechanism
through which the dues to the banks
and financial institutions could be
realized without delay. In 1981, aCommittee under the Chairmanship of
Shri T. Tiwari had examined the
legal and other difficulties faced
by banks and financial institutionsand suggested remedial measures
including changes in law. The
ig Tiwari Committee had also suggested
setting up of Special Tribunals for
recovery of dues of the banks andfinancial institutions by following
a summary procedure. The setting
up of Special Tribunals will not
only fulfill a long-felt need, but
also will be an important step inthe implementation of the Report of
Narasimham Committee. Whereas on
30th September 1990, more than
fifteen lakhs of cases fled by the
public sector banks and about 304cases filed by the financial
institutions were pending in
various Courts, recovery of debts
involved more than Rs.5662 Crores
in dues of Public Sector Banks andabout Rs.391 Crores of dues of the
financial institutions. The locking
up of such huge amount of public
money in litigation prevents proper
utilization and recycling of the
funds for the development of the
country.2.The Bill seeks to provide for the
establishment of Tribunals and
Appellate Tribunals for expeditious
adjudication and recovery of debts
due to banks and financial
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24institutions.”
10. Similarly we may make gainful reference to
the Statement of Objects and Reasons of the
Amendment Act 1 of 2000, which read as under:-
“Statement of Objects and Reasons:-
1.The Recovery of Debts due to
Banks and FinancialInstitutions Act, 1993 was
enacted on 27th August 1993 to
provide for the establishmentof Tribunals for expeditious
adjudication and recovery of
debts due to banks and
financial institutions and for
matters connected therewith orincidental thereto.
2.The legality and validity of
the Act, was, however,
challenged in the Delhi HighCourt. in the matter of Delhi
High Court Bar Association V/s
Union of India (AIR 1995 Delhi323), the Delhi High Court in
its judgment and order datedthe 10th March 1995, while
upholding the powers of the
Central Government to
constitute Tribunals other than
the Tribunals constituted in
exercise of powers under
articles 323A and 323B of the
Constitution, declared the
aforesaid Act unconstitutional
and void on ground which inter
alia include that–(i) the Act does not ::: Downloaded on - 09/06/2013 15:14:10 ::: 25 contain provisions for set-off, counter claims or transfer of cases from one Tribunal to another; (ii) the Act has placed the Tribunals on a pedestal higher than the High Court in respect of monetary jurisdiction; and (iii) the judiciary has been given no role in the ig appointment Presiding Officers. of3.In the Special Leave Petition,
filed before it, the Hon’ble
Supreme Court on 18th March
1996, while dealing with
Transfer Petitions (Civil)659-667/95 directed that
notwithstanding any stay order
passed in any of the Writ
Petitions sought to be
transferred to the SupremeCourt, the Debts Recovery
Tribunals established under the
Recovery of Debts due to Banks
and Financial Institutions Act,
1993 shall resume theirfunctions. The Debts Recovery
Tribunals have been functioning
under the stay order granted by
the Supreme Court for over
fifty months. In subsequent
hearings before the Hon’ble
Supreme Court, a submission was
made that the Central
Government would consider
amending the Act to address the
legal anomalies while ensuring
that the dedicated nature of
the recovery system does not
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26get diluted. In backdrop of
the observation made by the
Supreme Court, there was apossibility that the Supreme
Court would vacate the stayorder against the order of
Delhi High Court. in such an
eventuality, the Tribunals
would cease to exist, all casewhich have been transferred to
Debts Recovery Tribunals from
the High Courts or have been
freshly instituted before theDebts Recovery Tribunals would
have to be transferred back to
ig respective High Courts and all
progress made by the Tribunals
would be undone. The abovecircumstances necessitated that
the purported amendments may be
given effect by promulgation of
an Ordinance. These amendments
have been made to address thelegal anomalies observed by the
Hon’ble Court. It is now
necessary that the Ordinance
may be replaced by an Act.
4.Amendments to the Recovery of
Debts Due to Banks and
Financial Institutions Act,
1993 are proposed to ensure
expeditious adjudication andrecovery of dues to banks and
financial institutions, remove
legal anomalies and strengthen
the Recovery Tribunals. The
main provisions of the Bill
relate to–
(i) set-off and counter
claims, appointment of
Receivers and
Commissioners by the
Tribunal, transfer of
cases from one Tribunal to
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27another and appointment of
more than one Recovery
Officer in a Tribunal;
(ii) empowering the Tribunals
to issue certificates forrecovery of enhanced or
reduced amount on the
basis of the final order
of the Appellate Tribunal;
(iii) empowering the
Chairperson of the
Appellate Tribunal to
appraise the work ofPresiding Officers of
Tribunals and discharge
ig functions of
Chairperson of another
theAppellate Tribunal;
(iv) the transfer of recovery
certificates from one
Tribunal to another
Tribunal to facilitate
recovery;
(v)empowering the Tribunals
to distribute sale
proceeds among the
secured creditors in
accordance with theprovisions of Section
529A of the Companies
Act;
(vi) the laying of
notifications issued
under sub-section (4)
of Section 1, section
2 and sections 8 of
the Act before the
Parliament.
5. The Bill seeks to replace
the said Ordinance.”
11. As can be seen from the Statement of Objects
and Reasons the Act was introduced to provide an
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28
alternative forum to the Civil Court by way of
Tribunals to decide claims by financial
institutions in respect of debts due to them by
borrowers. The amendment Act, I of 2000, inter
alia, sought to empower the Tribunals created
and functioning under the RDB Act with (i) the
power to entertain set offs and counter-claims;
and (ii) the power to distribute sale proceeds
of companies in liquidation, among secured
creditors under Section 529-A of the Companies
Act, 1956. Considering these objects the
primary underlying object of the RDB Act and
Amendment Act I of 2000 is the expeditious
adjudication and recovery of dues of banks and
financial institutions. In the case of United
Bank of India V/s. The Debts Recovery Tribunal
and Ors. [(1999) 4 SCC p.69], the Hon’ble
Supreme Court of India, observed as under:-
“6. The Act and he relevant
provisions will have to be construed
bearing in mind the objects for which
the Parliament passed the enactment.
The prime object of the enactment
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29appears to be to provide for the
establishment of tribunals for
expeditious adjudication and recovery
of debts due to banks and financial
institutions and for matters
connected therewith or incidental.”
12. Having considered the object behind
enacting the RDB Act (including the 2000
Amendment), we may consider some provisions of
the RDB Act :-
Section 2(g): “debt” means any
liability (inclusive of interest)which is claimed as due from any
person by a bank or a financialinstitution or by a consortium of
banks or financial institutions
during the course of any business
activity undertaken by the bank orthe 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 whetherpayable 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.”
Section 17: Jurisdiction, powers
and authority of Tribunals.–(1) A
Tribunal shall exercise, on and
from the appointed day, the
jurisdiction, powers and authority
to entertain :::and ondecide
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30
applications from the banks and
financial institutions for
recovery of debts due to such
banks and financial institutions.
(2) An Appellate Tribunal shall
exercise, on and from the
appointed day, the jurisdiction,
powers and authority to entertain
appeals against any order made, or
deemed to have been made, by a
Tribunal under this Act.”
Section 18: Bar of Jurisdiction:
On and from the appointed day, no
Court or other authority shall
have, or be entitled to exercise,
any jurisdiction, powers of
authority (except the Supreme
Court, and a High Court exercising
jurisdiction under articles 226
and 227 of the Constitution) in
relation to the matters specified
in Section 17.
Section 20: “Appeal to the
Appellate Tribunal.–(1) Save as
provided in sub-section (2), any
person aggrieved by an order made,
or deemed to have been made, by a
Tribunal under this Act, may
prefer an appeal to an Appellate
Tribunal having jurisdiction in
the mater.
(2) No Appeal shall lie to the
Appellate Tribunal from an order
made by a Tribunal with the
consent of the parties.
(3) Every appeal under sub-section
(1) shall be filed within a period
of forty five days from the date
on which a copy of the order made,
or deemed to have been made, by
the Tribunal is received by him
and it shall be in such form and
be accompanied by such fee as may
be prescribed: Provided that the
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Appellate Tribunal may entertain
an appeal after the expiry of the
said period of forty five days if
it is satisfied that there was
sufficient cause for no filing it
within that period.
(4) On receipt of an appeal under
sub-section (1), the Appellate
Tribunal may, after giving the
parties to the appeal, an
opportunity to being heard, pass
such orders thereon as it thinks
fit, confirming, modifying or
setting aside the order appealed
against.
(5) The Appellate Tribunal shall
send a copy of every order made by
it to the parties to the appeal
and to the concerned Tribunal.
(6) The appeal filed before the
Appellate Tribunal under sub-
section (1) shall be dealt with by
it as expeditiously as possible
and endeavour shall be made by it
to dispose off the appeal finally
within six months from the date of
receipt of the appeal.”
Section 22(e): reviewing the
decisions.
Section 29: “Application of
certain provisions of Income Tax
Act.–The provisions of the Second
and Third Schedules to the Income
Tax Act, 1961 (43 of 1961) and the
Income Tax (Certificate
proceedings) Rules, 1962, as in
force from time to time shall, as
far as possible, apply with
necessary modifications as if the
said provisions and the rules
referred to the amount of debt due
under this Act instead of to the
income tax.”
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Section 30: “Appeal against the
order of Recovery Officer.–(1)
Notwithstanding anything contained
in section 29, any person
aggrieved by an order of the
Recovery Officer made under this
Act may, within third days from
the date on which a copy of the
order is issued to him, prefer an
appeal to the Tribunal.
(2) On receipt of an appeal under
sub-section (1), the Tribunal may,
after giving an opportunity to the
appellant to be heard, and after
making such enquiry as it deems
fit, confirm, modify or set aside
the order made by the Recovery
Officer in exercise of his powers
under section25 to 28 (both
inclusive).”
Section 34: “Act to have
overriding effect.–(1) Save as
provided under sub-section (2),
the provisions of this Act shall
have effect notwithstanding
anything inconsistent therewith
contained in any other law for the
time being in force or in any
instrument having effect by virtue
of any law other than this Act.
(2)The provisions of this Act or the
rules made thereunder shall be in
addition to, and not in derogation of,
the Industrial Finance Corporation Act,
1948 (15 of 1948), the State Financial
Corporation Act, 1951 (63 of 1951), the
Unit Trust of India Act, 1963 (52 of
1963), the Industrial Reconstruction
Bank of India Act,1984 (62 of 1984),
the Sick Industrial
::: Companies (Special
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33
Provision) Act, 1985 (1 of 1986) and
the Small Industries Development Bank
of India Act, 1989 (39 of 1989).”
13. We may also refer to Rules 9 and 11 (to
the extent required) of the Second Schedule to
the Income Tax Act, 1961 Rules 9 and 11 reads as
under:-
“General bar to jurisdiction of civil
Courts, save where fraud alleged:
9.Except as otherwise expressly provided in
this Act, every question arising between
the Tax Recovery Officer and the defaulter
or their representatives, relating to the
execution, discharge or satisfaction of a
certificate or relating to the confirmation
or setting aside by an order under this Act
of a sale held in excusion of such
certificate, shall be determined, not by
suit, but by order of the Tax Recovery
Officer before whom such question arises:
Provided that a suit may be brought in a
civil court in respect of any such question
upon the ground of fraud.
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Rule 11 reads as under:-
“Investigation by Tax Recovery Officer:
(1) Where any claim is preferred to, or any
objection is made to the attachment or sale
of, any property in execution of a
certificate, on the ground that such
property is not liable to such attachment
or sale, the Tax Recovery Officer shall
proceed to investigate the claim or
objection:
Provided that no such investigation shall
be made where the Tax Recovery Officer
considers that the claim or objection was
designedly or unnecessarily delayed.
(2) Where the property to which the claim
or objection applies has been advertised
for sale, the Tax Recovery Officer ordering
the sale may postpone it pending the
investigation of the claim or objection,
upon such terms as to security or otherwise
as the Tax Recovery Officer shall deem fit.
(3) The claimant or objector must adduce
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35
evidence to show that —
(a) (in the case of immovable property) as
the date of the service of the notice
issued under this Schedule to pay the
arrears, or
(b) (in the case of movable property) at
the date of the attachment, he had some
interest in, or was possessed of, the
property in question.
(4) Where, upon the said investigation, the
Tax Recovery Officer is satisfied that, for
the reason stated in the claim or
objection, such property was not, at the
said date, in the possession of the
defaulter or of some person in trust for
him or in the occupancy of a tenant or
other person paying rent to him, or that,
being in the possession of the defaulter at
the said date, it was so in his possession,
not on his person, or partly on his own
account and partly on account of some
other person, the Tax Recovery Officer
shall make an order releasing the property,
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36
wholly or to such extent as he thinks fit,
from attachment or sale.
(5) Where the Tax Recovery Officer is
satisfied that the property was, at the
said date, in the possession of the
defaulter as his own property and not on
account of any other person, or was in the
possession of some other person in trust
for him, or in the occupancy of a tenant or
other person paying rent to him, the Tax
Recovery Officer shall disallow the claim.
(6) Where a claim or an objection is
preferred, the party against whom an order
is made may institute a suit in a civil
court to establish the right which he
claims to the property in dispute; but,
subject to the result of such suit (if
any), the order of the Tax Recovery Officer
shall be conclusive.”
14. An informed and purposive reading of the
RDB Act, would make it clear that the RDB Act
is a self contained Code for all matters
concerning the adjudication and ‘recovery’ of
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37
debts due to banks and financial institutions in
respect of :-
(i) ‘adjudication’ of debts due to
banks and financial institutions;
(ii) ‘recovery’ of debts due to banks
and financial institutions; and
(iii)all matters ‘connected’ or
‘incidental’ to (i) and (ii).
In other words, once there is an application
made by a Bank or Financial Institution
asserting that there is a debt due to it, the
Tribunals constituted under the RDB Act alone
can decide matters of ‘adjudication’;
‘recovery’; and matters connected or incidental
thereto including counter claims and set off.
15. At this juncture before proceeding further
we may consider one of the arguments advanced on
behalf of the defendant that permitting a Civil
Court to exercise jurisdiction would be
permitting a review of the judgment and/or order
of Authorities under the R.D.B. Which have
become final.
16. This argument, in our opinion, has to be
rejected for the following reasons:-
a) An order which affects the rights of
parties to which such parties were not
parties would not bind such parties.
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b) The RDB Act does not expressly contain
any specific provision giving finality to
the order passed by the D.R.T., though
under Section 34(1) the Act has overriding
effect subject to what is contained in
Section 34(2).
c) The jurisdiction now exercised by
Tribunals under the RDB Act was earlier
exercised by the Civil Court under Section
9 of the Code of Civil Procedure, which is
now excluded in matters covered by Section
17 of the RDB Act.
17. Let us now consider the judgment in
Allahabad Bank V/s. Canara Bank (supra).
The Supreme Court was considering the
conflicting jurisdictional provisions of the RDB
Act and the Companies Act, insofar as
determination of priorities of rival claims was
concerned. The rival claims which were
considered by the Hon’ble Supreme Court were (i)
claims by Banks and Financial Institutions; and
(ii) claims by other creditors. It was contended
before the Supreme Court that, under the
Companies Act, 1956, in the case of a company in
liquidation, the question :::of priorities was
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39
required to be determined by the Company
Court/liquidator. It was contended that the
machinery under the RDB Act was only for claims
by banks and secured creditors whilst the
provisions of the Companies Act covered all
claims. After an exhaustive discussion of the
provisions of the RDB Act and circumstances
which led to its enactment, the Supreme Court
held that the Debt Recovery Tribunal had
exclusive jurisdiction to decide the issue of
priorities of all claimants (including third
parties), since claims by Banks and Financial
Institutions were involved.
What falls from the decision would be the
following propositions:-
i. the jurisdiction of the tribunals
under the RDB Act is exclusive onmatters of ‘adjudication’ and
‘recovery’. In other words, even in
matters of ‘execution’ of aRecovery Certificate, the
jurisdiction is exclusive;
ii. the exclusive jurisdiction covers
claims by third parties, as well
and exclusivity cannot be
restricted to Banks/Financial
Institutions and the Defendant to
the Original Application (OA) filed
before the DRT. A totally
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40independent third party creditor
whose claim has no nexus with theclaim of the Bank/Financial
institution, is entitled to fileobjections before the Recovery
Officer constituted under the RDBAct, because his claim potentially
conflicts/impacts/affects the claim
by the Bank/Financial Institutions;
18. Thus it will be clear that on consideration
of the Statement of Objects and Reasons of the
Act and the Amendment Act they inter alia seek
to empower the Tribunals functioning under the
RDB Act to adjudicate disputes between the Banks
and Financial Institutions and their borrowers
and in view of the Amendment Act 1 of 2000 also
entertain set-off and counter-claims as also the
power to distribute the sale proceeds of the
companies in liquidation amongst secured
creditors under Section 529A of the Companies
Act.
19. The next question that will have to be
considered is whether the judgment in Allahabad
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41
Bank (supra) has concluded the issue as to the
ouster of jurisdiction of the Civil Court. The
Court had fixed as many as six points for
consideration as set out in para.13. We are
concerned with Point No.1 which reads as under:-
“(1) Whether in respect of proceedings under
the RDB Act at the stage of adjudication for
the money due to the banks or financial
institutions and at the stage of execution
for recovery of monies under the RDB Act,
the Tribunal and the Recovery Officers are
conferred exclusive jurisdiction in their
respective spheres?”
After considering the scheme of the Act the
Court observed that it is not intendment of the
Act that while the basic liability of the
defendant is to be decided by the Tribunal under
Section 17, the banks/financial institutions
should go to the civil court or the Company
Court or some other authority outside the Act
for the actual realisation of the amount. The
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42
Certificate granted under Section 19(22) has,
to be executed only by the Recovery Officer. No
dual jurisdictions at different stages are
contemplated. Considering Section 34, the Court
further observed that the prescription of an
exclusive Tribunal both for adjudication and
execution is a procedure clearly inconsistent
with realisation of these debts in any other
manner. It is, therefore, held that the
jurisdiction of the Recovery Officer is
exclusive. After having so said the Court noted
as under:-
“25. Thus, the adjudication of liability
and the recovery of the amount by execution
of the certificate are respectively within
the exclusive jurisdiction of the Tribunal
and the Recovery Officer and no other court
or authority much less the civil Court or
the Company Court can go into the said
questions relating to the liability and the
recovery except as provided in the Act”.
Thus the adjudication of liability and the
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43
recovery of the amount by execution of
certificate are respectively within the
exclusive jurisdiction of the Tribunal and the
Recovery Officer and no other Court or authority
much less the Civil Court or the Company Court
can go into the said question relating to the
liability and the recovery except as provided in
the Act. Therefore, parties will have to seek
remedies under the Act. It would thus be clear
that even in respect of matters pertaining to
execution it is the Recovery Officer alone who
would have jurisdiction. That would be subject
to the other provisions of the Act which would
include Section 29 as also Rule 11 of the
second Schedule to the Income Tax Act.
20. Earlier in Union Bank of India vs. The Debts
Recovery Tribunal & Ors., 1999 (4) SCC 69 the
Court had observed that the Act and the
relevant provisions will have to be construed
bearing in mind the objects for which the
Parliament passed the enactment. The prime
object of the enactment appears to be to provide
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44
for the establishment of Tribunals for
expeditious adjudication and recovery of debts
due to banks and financial institutions and for
matters connected therewith or incidental
thereto. The Court then observed as under:-
“In ascertaining the question whether any
particular claim of any bank or financial
institution would come within the purview
of the tribunal created under the Act, it
is imperative that the entire averments
made by the plaintiff in the plaint have to
be looked into and then find out whether
notwithstanding the specially created
tribunal having been constituted, the
averments are such that it is possible to
hold that the jurisdiction of such tribunal
is ousted.”
21. The ouster of jurisdiction of the Civil
Court to that extent will also have to be
considered and we may gainfully refer to some of
the conclusions arrived at by the Supreme Court
in Dhulabhai etc., v. State of Madhya Pradesh
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45
and Anr., AIR 1969 S.C. 78. The following
principles may be gainfully reproduced from the
said judgment:-
“The result of this inquiry into the diverse
views expressed in this Court may be stated as
follows:-
1.Where the statute gives a finality to the
orders of the special tribunals the civl
Courts jurisdiction must be held to be
excluded if there is adequate remedy be
excluded if there is adequate remedy to do
what the civil courts would normally do in
a suit. Such provision, however, does not
exclude those cases where the provisions of
the particular Act have not been complied
with or the statutory tribunal has not
acted in conformity with the fundamental
principles of judicial procedure.
(2) Where there is an express bar of the
jurisdiction of the court, an examination
of the scheme of the particular Act to find
the adequacy or the sufficiency of the
remedies provided may be relevant but is
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46
not decisive to sustain the jurisdiction of
the civil court.
Where there is no express exclusion the
examination of the remedies and the scheme
of the particular Act to find out the
intendment becomes necessary and the result
of the inquiry may be devisive. In the
latter case it is necessary to see if the
statute creates a special right or a
liability and provides for the
determination of the right or liability
and further lays down that all questions
about the said right and liability shall be
determined by the tribunals so constituted,
and whether remedies normally associated
with actions in civil courts are prescribed
by the said statute or not.
(3)….
(4)….
(5)….
(6) Questions of the correctness of the
assessment apart from its constitutionality
are for the decision of the authorities and
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47
a civil suit does not lie if the orders of
the authorities are declared to be final or
there is an express prohibition in the
particular Act. In either case the scheme
of the particular Act must be examined
because it is a relevant equity.
(7) An exclusion of the jurisdiction of the
civil Court is not readily to be inferred
unless the conditions above set down apply.
22. These principles have been reiterated in
Raja Ram Kumar Bhargava (Dead) by Lrs. vs. Union
of India, (1988)1 SCC 681. We may gainfully
reproduce paragraph 19 which reads as under:-
“19. But then, even if the right to claim
interest on the refunds of excess profits
tax could be said to have been preserved,
the question yet remains whether a suit for
its recovery is at all maintainable. The
question runs on the scope of the
exclusionary clause in the statute. The
effect of clauses excluding the civil
court’s jurisdiction are considered in
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48several pronouncements of the Judicial
Committee and of this Court (see Scretary
of State v. Mask & C., K.S.Venkataramkan &
Co. vs. State of Madras; Dhulabhai v. State
of Madhya Pradesh, Premier Automobiles Ltd.
vs. Kamalakar Shantaram Wadke. Generally
speaking, the broad guiding considerations
are that wherever a right, not pre existing
in common law, is created by a statute and
that statute itself provided a machinery
for the enforcement of the right, both the
right and the remedy having been created
uno flatu and a finality is intended to the
result of the statutory proceedings, then,
even in the absence of an exclusionary
provision the civil Court’s jurisdiction is
impliedly barred. If, however, a right
pre-existing in common law is recognised by
the statute and a new statutory remedy for
its enforcement provided, without expressly
excluding the civil Court’s jurisdiction,
then both the common law and the statutory
remedies might become concurrent remedies
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49
leaving open an element of election to the
persons of inherence. To what extent, and
on what areas and under what circumstances
and conditions, the civil court’s
jurisdiction is preserved even where there
is an express clause excluding their
jurisdiction, are considered in Dhulabhai
case.” (emphasis supplied).
23. Before proceeding to answer the issue, we
may also refer to the scope of Rule 11 of the
Second Schedule. The Hon’ble Supreme Court in
Tax Recovery Officer II, Sadar, Nagpur vs.
Gangadhar Vishwanath Ranade, (1998) 6 SCC 658,
was considering the scope of Rule 11. This Court
had taken a view that the Tax Recovery Officer
had no power under Rule 11 of the Second
Schedule to the Income Tax Act to declare as
void, transfer of property effected by the
Respondent there during the pendency of
proceedings against him under the Income Tax
Act. The Court noted the provisions of Section
281 of the Income Tax Act and held that Section
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281 merely declared what the law was. Section
281 did not prescribe any adjudicatory machinery
for deciding any question which may arise
under Section 281. As such the legislature had
no intention to confer an exclusive power and
jurisdiction upon the Income Tax Authorities to
decide the questions arising under Section 281.
The Court there was considering the question
whether in a proceeding under Rule 11 of the
Second Schedule to the Income Tax Act the Tax
Recovery Officer can declare a transfer as void
under Section 281. After considering the powers
of the Tax Recovery Officer and Rule 11(4)(5)
and (6) the Court observed that what the Tax
Recovery Officer has to examine is who is in
possession of the property and in what capacity.
Such Officer cannot declare any transfer made by
the assessee in favour of third party as void.
If the department finds that the property of the
assessee is transferred by him to a third party
with the intention to defraud the Revenue, it
will have to file a suit under Rule 11(6) to
have the transfer declared void under Section
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51
281. The Court then proceeded to observe as
under:-
“12. In the light of this discussion about
the provisions of Order 21 Rule 58 to 63,
if we examine Rule 11(4) of the Second
Schedule to the Income Tax Act, it is clear
that the Tax Recovery Officer is required
to examine whether the possession of the
third party is of a claimant in his own
right or in trust for the assessee or on
account of the assessee. If he comes to a
conclusion that the transferee is in
possession in his or her own right, he will
have to raise the attachment. If the
Department desires to have the transaction
of transfer declared void under Section
281, the Department being in the position
of a creditor, will have to file a suit for
a declaration that the transaction of
transfer is void under Section 281 of the
Income Tax Act.”
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24. Thus Rule 11 as incorporated in the
provisions of the RDB Act specifically provides
for third party objections. Sub-Rule (6) makes
it specifically clear that where a claim or
objection has been preferred the party against
whom an order is made such party may institute
a suit in the Civil Court to establish the right
which he claims in the property in dispute, but
subject to the result of such suit, if any, the
order of the Tax Recovery Officer, shall be
conclusive. For the Tax Recovery Officer we will
have to read Recovery Officer. Assessee in
terms of Section 29 shall be construed as the
Defendant. Rule 9 of the Second Schedule would
also indicate that dispute between the bank and
the debtor the machinery would be under the RDB
Act and not by way of suit. However, in respect
of objections of third parties who have a claim
it is the procedure under Rule 11 to the extent
applicable which will have to be considered.
25. On behalf of the Defendants learned Counsel
referred to the judgment in N.K. Chauhan & Ors.
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53
vs. State of Gujarat & Ors., (1977) 1 SCC 308
where the Supreme Court was considering the
meaning of expression “as far as practicable”.
While considering the said expression the
Supreme Court observed as under:-
“In short ‘as far as practicable’ means,
not interfering with the ratio which
fulfils the interest of administration, but
flexible provision clothing government with
powers to meet special situations where the
normal process of the government resolution
cannot flow smooth. It is a matter of
accent and import which affords the final
test in the choice between the two parallel
interpretations.”
The expression as far as possible has also been
considered by the learned Division Bench of this
Court in Keshrimal J. Shah (supra) in the very
context of this Act. This Court rightly noted
that the provisions do not get themselves
incorporated completely. They have to be read
into as far as possible and subject to such
modification as the context as well as object
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54
and purpose of the Act require. Similarly, a
Division Bench of the Andhra Pradesh High Court
in P. Mohanreddy & Ors. vs. Debts Recovery
Appellate Tribunal, Mumbai & Ors. AIR 2004 A.P.
94 had also occasion to consider the expression
“as far as possible ” in the context of Section
26. The learned Division Bench observed that
the language employed is such that there is
flexibility and it is not mandatory to follow
the rules as they are. Section 29 does not
impose an obligation on the Recovery Officer to
meticulously follow the provisions of Second and
Third Schedules.
30. In our opinion while considering the
expression “as far as possible”, the Court first
will have to examine the power conferred under
the provisions. Thereafter in exercise of the
powers the Court will have to examine whether
the plain or literal language of the provisions
would be inconsistent with the provisions of the
Act or the Rules and if it is so finds, then
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55
read it in a manner which will not make the
Rule inconsistent. If so read then the
expression “as far as possible” can be correctly
understood. As an illustration in the Act
itself the expression assessee has been referred
to as the Defendant. This gives an indication
of the intent of the Legislature as to how
Section 29 has to be read. It cannot mean that
Section 29 and second and third schedule and the
Rules referred to are to be held otiose. A
proper way of reading the said words would be to
give an effective meaning to the language of the
Second and Third Schedule of the Rules which
prescribe a procedure for claims by third
parties and which expressly under Rule 11 (6)
provides that when a claim or objection
preferred has been rejected a party against whom
an order is made may institute a suit in the
Civil Court to establish his right in the
property in dispute. This must be read in the
context of the observations by the Supreme Court
in G.V. Ranade (supra) that issues pertaining to
title cannot be gone into by the Recovery
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56
Officer while considering the third party claim
in proceedings in execution.
27. Having so considered it is clear that under
Section 17 of the RDB Act the D.R.T. has
exclusive jurisdiction to decide the application
from banks and financial institutions for
recovery of debts as defined under Section 2(g)
of the Act. Section 18 makes it clear that in
respect of such exclusive jurisdiction
pertaining to debts conferred by Section 17 no
Court or Authority shall have jurisdiction. This
obviously would not include a third party
claimant, who is not liable for any debt. The
judgment in Dr. Anil Nandkishor Tibrewala
(supra) which considered Section 19(25) of the
RDB Act will have to be considered in the
context that where an order is passed which has
the effect of amounting to an abuse of the
process of the Court, then it may be open to the
Tribunal to examine the issue to the extent that
it can consider.
28. Chapter V deals and specifies the
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57
procedure in so far as recovery of debt already
determined by the Tribunal. Section 25 provides
the mode of recovery of debts. Section 26 makes
it clear that the defendant cannot dispute the
correctness of the amounts specified in the
certificate and any other objection to the
certificate. . Section 27 amongst others
confers a power to correct a clerical or
arithmetical mistake in the Certificate by
withdrawing the certificate. Section 27 is a
power of granting stay. Section 28 provides
other modes of recovery other than that provided
under Section 25. Sections 25, 26, 27 and 28,
therefore, deal exclusively with the recovery
of amounts under a certificate issued under
Section 19 and mode of recovery if the amounts
set out in the certificate. Section 29 in the
context of recovery of the amounts due under the
certificate makes applicable the provisions of
Income Tax Act and certificate proceedings Rules
as set out.
29. Section 30 as now substituted by Act 1 of
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2000 begins with a non-obstante clause. A
person aggrieved by an order of the Recovery
Officer may within thirty days from the date on
which a copy of the order is issued to him,
prefer an appeal to the Tribunal. Under Sub-
section (2) of Section 30 a power is given to
set aside or modify an order made under Sections
25 to 28. Section 30 cojointly with Section 29
would mean that irrespective of the Appellate
remedy provided in Part VI of IInd Schedule
(Rule 86) to the I.T. Act an Appeal would lie to
the Tribunal in respect of orders made under the
Second Schedule to the I.T. Act. We may clarify
that considering the language of Rule 11(6) an
appeal would not lie under Rule 86 of the Second
Schedule. Therefore, under Section 30 even if
an appeal as provided under Rule 86 is not
available because of Rule 11(6) making the
order of the Recovery Officer conclusive,
nevertheless Section 30 of the Act provides a
remedy by way of Appeal against the order passed
under the IInd Schedule. We may clarify here
that Section 20 is a provision for Appeal from
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an order of the Tribunal, when Section 30 is a
provision for appeal against the order of the
Recovery Officer.
29. If the Act itself provides a remedy is it
open to a Court by a process of interpretation
to deny to a party that remedy which is a remedy
under the Act itself. Under Rule 9 of the
Schedule II to the Income Tax every question
arising between the Recovery Officer and the
defaulter as set out has to be determined by the
Recovery Officer and not by a suit. In other
words the jurisdiction of the Civil Court in
such matter is barred. Under Rule 11 when a
claim or objection is preferred by a third party
to the attachment or sale of property , under
Rule 11(6) the party against whom an order is
passed may institute a Civil Suit. This,
therefore, is a remedy expressly provided by
the Act itself. Thus in matters pertaining to
execution of certificate, apart from the modes
available under Sections 25 to 28, by virtue
of Section 29, which by incorporation has
made the provision of the Second and Third
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Schedule to the Income Tax Act and the Income
Tax (Certificate Proceedings) Rules, 1962 as a
part of Chapter V of the R.D.B. Act that mode is
also available. Thus the R.D.B. Act itself in a
matter pertaining to execution or enforcement
of a certificate and objection claim by a
third party to attachment or sale has provided
the remedy of suit. Thus it would be clear that
in such matters the jurisdiction of the Civil
Court is not barred.
30. In our opinion, therefore, on a construction
of the various contentions raised and even after
considering the expression “as far as possible”
it is not possible to hold that the jurisdiction
of the Civil Court is totally ousted, in
matters pertaining to third party claims
regarding attachment or sale of property.
execution. Thus it will be open to a party to
take recourse to the remedy available under
Section 30 if it has made its claim before the
Recovery Officer and that is rejected. This is
because the title to the property as explained
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by the Supreme Court in Gangadhar V. Ranade
(supra) cannot be decided by the Recovery
Officer under the Second Schedule of the I.T.
Act and that has been left open for
consideration by a Civil Court. The judgment in
Allahabad Bank (supra) in para.25, which we have
referred to earlier, has also made this
expressly clear when it uses the expression
“except as provided under the Act”.
31. It will, therefore, not be possible to hold
that inspite of the specific provision of Rule
11(6) of the Second Schedule to the Income Tax
Act, the jurisdiction of the Civil Court is
expressly or impliedly barred. That would be
rendering the Rule 11 otiose. Such a
construction is not possible. When the Act
itself has provided a remedy, that remedy cannot
be defeated by an interpretative process that
renders the statutory remedy otiose.
32. In our opinion considering the discussion in
none of the three Judgments which have been
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considered, this Court has taken the view that
the jurisdiction of the Civil Court is impliedly
or expressly barred. The judgments of the
Courts are not to be interpreted like a
statute. The ratio has to be culled out from
the facts and what was in issue. What has to
be considered is the ratio of the judgment. It
is, therefore, not possible to accept the
contention that on the consideration of the
judgments this Court has taken a view that the
jurisdiction of the Court is expressly or
impliedly barred.
33. In that context the question referred to
for our consideration may now be answered.
(i) Question No.1 would have to be answered
in the affirmative. The remedy of an
Appeal provided under Section 30 would not
oust the jurisdiction of the Civil Court in
entertaining a Civil Suit as provided under
Rule 11 (6) of the Second Schedule to the
I.T. Act.
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(ii) Question No.2 will have to be answered
with a clarification. Section 29
incorporates Schedule II of I.T. Act into
the R.D.B. Act and provides another mode of
recovery in terms of the certificate from
the defaulter (judgment debtor). However,
third parties who have a right or interest
to the property sought to be attached or
sold can considering Rule 11 of the Second
Schedule to the Income Tax Act file their
objections. With the above clarification
the question is answered in the
affirmative.
(iii) In so far as Question No.3 is
concerned, the normal remedy of such a
party could be to invoke the provisions of
Rule 11 of the Second Schedule to the
I.T.Act. It is also open to a third party
aggrieved by a declaration in respect of a
property in which such party claims a
right or interest to apply under Section
19(25), if that provision is attracted.
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(iv) The questions as referred are
accordingly answered.
(D.G. KARNIK, J.) (FERDINO I.REBELLO, J.)
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