{"id":120794,"date":"2006-12-13T00:00:00","date_gmt":"2006-12-12T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/southern-petrochemicals-vs-administrator-of-specified-on-13-december-2006"},"modified":"2015-11-09T13:00:46","modified_gmt":"2015-11-09T07:30:46","slug":"southern-petrochemicals-vs-administrator-of-specified-on-13-december-2006","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/southern-petrochemicals-vs-administrator-of-specified-on-13-december-2006","title":{"rendered":"Southern Petrochemicals … vs Administrator Of Specified … on 13 December, 2006"},"content":{"rendered":"
Supreme Court of India<\/div>\n
Southern Petrochemicals … vs Administrator Of Specified … on 13 December, 2006<\/div>\n
Author: B Singh<\/div>\n
Bench: B.P. Singh, Altamas Kabir<\/div>\n
           CASE NO.:\nAppeal (civil)  5782 of 2006\n\nPETITIONER:\nSouthern Petrochemicals Industries Corporation Ltd\n\nRESPONDENT:\nAdministrator of Specified Undertaking of Unit Trust of India and others\n\nDATE OF JUDGMENT: 13\/12\/2006\n\nBENCH:\nB.P. Singh & Altamas Kabir\n\nJUDGMENT:\n<\/pre>\n
J U D G M E N T
\n(Arising out of SLP) No.25643 OF 2004) <\/p>\n
B.P. SINGH, J.\n<\/p>\n
\tSpecial Leave granted.\n<\/p>\n
\tIn this appeal by special leave, the appellant M\/s. Southern
\nPetrochemicals Industries Corp. Ltd. has impugned the judgment and order
\nof the High Court of Judicature at Bombay dated August 10, 2004 in Writ
\nPetition No.5758 of 2004 upholding the order passed by the Chairperson of
\nthe Debts Recovery Appellate Tribunal in Misc. Appeal No.132 of 2004.
\nThe High Court held that the action brought against the appellant company
\nby respondents 1 and 2 herein for recovery of debts due to them, was rightly
\nentertained by the Tribunal constituted under the Recovery of Debts Due to
\nBanks and Financial Institutions Act, 1993, which had jurisdiction to
\nentertain the claim.  The objection to the jurisdiction of the Debts Recovery
\nTribunal was taken at the threshold and, therefore, in this appeal we are not
\nconcerned with the merit of the claims of respondents 1 and 2.\n<\/p>\n
\tThe questions which arise for consideration in this appeal are whether
\nrespondents 1 and 2, namely, Administrator of Specified Undertaking of
\nUnit Trust of India and UTI Trustee Company Private Limited are “financial
\ninstitutions” within the meaning of that term in the Recovery of Debts Due
\nto Banks and Financial Institutions Act, 1993 (hereinafter referred to as the
\n‘DRT Act’).  If the answer is in the affirmative, whether the action brought
\nby them before the Debts Recovery Tribunal is for recovery of debts due to
\nthem from the appellant herein, and not due to any other person on whose
\nbehalf the aforesaid respondents are suing.\n<\/p>\n
\tThe factual background in which these questions arise is as follows:-
\n\tUnder a common loan agreement dated October 1, 1992 executed
\nbetween the Unit Trust of India (for short ‘UTI’), the Industrial
\nDevelopment Bank of India (for short ‘IDBI’) as the lead institution, IFCI,
\nrespondent No.4 herein, ICICI Ltd., respondent No.5 herein, and the
\nappellant herein, a sum of Rs.10 crores was advanced to the appellant for its
\nproject on the terms and conditions contained therein.  The UTI also
\nadvanced a sum of Rs.25 crores against privately placed debentures.  The
\nappellant Company accumulated liabilities exceeding Rs.1,000 crores and
\ndefaulted in its obligation to the UTI under the common loan agreement.
\nThe Reserve Bank of India was contemplating a restructure scheme pursuant
\nto which all the creditors of the appellant company met in September, 2003
\nto consider proposals for reduction in the rate of interest and fresh
\nscheduling of re-payment etc..  There was a general consensus among the
\nother creditors but the Unit Trust of India did not agree with the suggested
\nscheme and instead filed a claim under the DRT Act being O.A. No.237 of
\n2003.\n<\/p>\n
\tAt this stage, it may be noted that under the UTI (Transfer of
\nUndertaking and Repeal) Act, 2002 (hereinafter referred to as ‘UTI Act,
\n2002’), respondent No.1, the Administrator of Specified Undertaking of Unit
\nTrust of India, and respondent No.2 UTI Trustee Company Private Limited,
\nwere created.  The Unit Trust of India Act, 1963 was repealed and the Board
\nof Trustees referred to in Section 10 of the said Act stood dissolved.\n<\/p>\n
\tIn O.A. No.237 of 2003, the appellant filed a Misc. Application on
\nDecember 12, 2003 praying for dismissal of the O.A. on the ground that
\nrespondents 1 and 2 not being “financial institutions” within the meaning of
\nthat term in the DRT Act, the Tribunal under the Act had no jurisdiction to
\nentertain and decide the application filed by respondents 1 and 2 for alleged
\nrecovery of debts due to them.  The Debts Recovery Tribunal by its order of
\nFebruary 12, 2004 dismissed the said application.  The appellant challenged
\nthe order of the Tribunal before the Debt Recovery Appellate Tribunal but
\nthe appeal was also dismissed on May 5, 2004.  The Appellate Tribunal held
\nthat respondents 1 and 2 were “financial institutions” as defined by Section 2\n<\/p>\n
(h) (i) of the DRT Act and, therefore, the application by them for recovery of
\ndebts due from the appellant was maintainable under Section 19 of the DRT
\nAct.\n<\/p>\n
\tThe Appellate Order was challenged before the High Court of
\nBombay in writ petition No.5758 of 2004 which was also rejected on August
\n10, 2004.  The appellant has preferred this appeal by special leave
\nimpugning the judgment and order of the High Court.\n<\/p>\n
\tWe may very briefly notice the findings recorded by the High Court.
\nThe High Court held that the provisions of Section 18 of the UTI Act, 2002
\nhas the effect of substituting in every Act, Rule, Regulation enacted by the
\nParliament and\/or Notification issued thereunder by the Central
\nGovernment, the names of respondents 1 or 2 in place of the words “Unit
\nTrust of India”, as the case may be. In view of the provisions of Section 18,
\nno further amendment was required to be effected separately and
\nindependently in every Act, Rule, Regulation enacted by the Parliament.
\nThe whole purpose of Section 18 was to bring about this effect so that it
\nbecame unnecessary to make numerous amendments in the various Acts,
\nRules and Regulations etc.  The Parliament had the legislative competence
\nto enact such a provision which it has done.  Referring to the Companies Act
\nit held that by virtue of the provisions of Section 18 of the UTI Act, 2002,
\nthe provisions of Section 4A of the Companies Act also stood amended.  As
\na result, instead of words “Unit Trust of India” found in Clause (v) of sub-
\nsection (1) of Section 4A of the Companies Act, the names of respondent 1
\nor 2, as the case may be, stand substituted.  As a necessary consequence
\nrespondents 1 and 2 are deemed to be “financial institutions” under Section
\n4A of the Companies Act.  Such being the legal effect respondents 1 and 2
\nshall also be deemed to be “financial institutions” under Section 2(h) (i) of
\nthe DRT Act.  Consequently, the application filed by respondents 1 and 2
\nwas maintainable, they being “financial institutions” suing for the recovery
\nof debts due to them.\n<\/p>\n
\tThe High Court also negatived the contention urged on behalf of the
\nappellant that even if respondents 1 and 2 were financial institutions, they
\ncould not maintain the Original Application before the Debts Recovery
\nTribunal since they were suing in the capacity of debenture trustee holders
\nor as agent of the Central Government, and not claiming recovery of amount
\ndue to them.  The judgment of the Bombay High Court in Krishna Filaments
\nLimited Vs. Industrial Development Bank of India & Ors. (2004) 118
\nCompany Cases 356 was distinguished on facts.\n<\/p>\n
\tShri K.K. Venugopal, senior advocate, appearing on behalf of the
\nappellant advanced four main submissions before us.  Firstly, he submitted
\nthat the use of the words “as the case may be” in Section 18 of UTI Act,
\n2002 introduced an element of uncertainty.  Section 18 seeks to substitute in
\nthe place of the Unit Trust of India, the names of respondents 1 and 2 herein
\nin all Acts, Rules or Regulations etc.  This provision does not lay down with
\nany certainty as to which of the two respondents shall be deemed to be a
\nfinancial institution in a particular Act, Rule or Regulation.  The use of the
\nwords “as the case may be” could not be included in a definition clause.  It is
\nnot permissible to say in a definition clause that in each case it must be
\ndiscovered which of the two names is more appropriate.  According to him,
\nthe language of Section 18 does not at all give effect to the purpose for
\nwhich it was enacted.  Secondly, he submitted that under the DRT Act, the
\ndebt sought to be recovered must be due to the financial institution.  A
\nfinancial institution acting as an agent cannot claim on behalf of its principal
\nwhich is not a financial institution.  The claim must be in its own right and
\nnot on behalf of its principal which is not a financial institution.  Relying on
\nthe provisions of the Act he contended that the Administrator acts as an
\nagent of the Central Government.  The legislative scheme of the UTI Act,
\n2002 disclosed the existence of principal agent relationship and, therefore, as
\nsuch agent the Administrator could not maintain a claim under the DRT Act.
\nSimilarly, a trustee also could not invoke the provisions of the DRT Act.  He
\nsubmitted that the term “vested” may have different meanings depending
\nupon the context, the language, and the object of the statute.  It may mean
\nvesting of the assets or it may mean only vesting of the management.  The
\nstatute must be construed having regard to its purpose with a view to find in
\nwhom the assets vests.  According to him, the autonomy of the two entities
\nunder the scheme envisaged by UTI Act, 2002, has been maintained only for
\nthe purpose of accounting so that their performance may be objectively
\njudged.  While making payments, the value, assets and the liabilities of the
\nTrust must be taken into account.  Section 7 of the UTI Act, 2002 when it
\nuses the words “for and on behalf of” import the concept of agency under
\nSection 182 of the Contract Act.  He emphasised the distinction between
\ntrustee and agent enunciated in W.O. Holdsworth & Ors. Vs. The State of
\nU.P. 1958 SCR 296  and submitted that the words used do not signify
\nvesting of ownership, but only vesting of management on behalf of the
\nCentral Government.  The power to appoint the Administrator and his\/its
\nadvisors, as also the power to give directions vests in the Central
\nGovernment.  In any event, a financial institution could not recover dues
\nunder the DRT Act acting as a trustee.  Far reaching and adverse
\nconsequences may follow if banks are allowed to sue under the DRT Act in
\nsuch or similar capacity that is agent, trustee etc. <\/p>\n
\tThirdly, he submitted that there was no plea raised on behalf of
\nrespondents 1 and 2 that the funds invested came out of the assets and
\nschemes entrusted to them.\n<\/p>\n
\tLastly, it was submitted that under Section 19 B of the Unit Trust of
\nIndia Act, 1963 special provision for enforcement of claim by the Trust have
\nbeen made which were quite effective and sufficient.  The stringent
\nprovisions contained therein were sufficient to protect the interest of the Unit
\nTrust of India.   On the other hand, Section 19 of the DRT Act provides for
\nanother procedure for recovery of debts due to banks and financial
\ninstitutions.  Relying upon the judgment of this Court in Chhagan Lal
\nMagan Lal (P) Ltd. etc. etc. Vs.  Municipal Corporation of Greater Bombay
\nand Ors. etc. etc. (1974) 2 SCC 402, he submitted that the two procedures
\nlaid down under two different acts for recovery of dues violated Article 14
\nof the Constitution of India.\n<\/p>\n
\tAfter submissions were made by the respondents herein, Shri
\nVenugopal did not press the last two submissions noted above.  The
\nsubmission based on Section 5(4) of the UTI Act, 2002 was not pressed
\nsince it touched the merit of the claim of respondents 1 and 2, which could
\nnot be gone into at this stage.  Similarly, the submission based on Section 19
\nB of the Unit Trust of India, 1963 and Section 19 of the DRT Act was not
\npressed in view of the principles laid down by this Court in its judgment in
\nGujarat State Financial Corporation Vs. Natson Manufacturing Co. Pvt.
\nLtd. and Ors. (1979) 1 SCC 193.  We shall not therefore, notice the
\nsubmissions urged by the respondents in response to the aforesaid two
\nsubmissions not pressed by Shri Venugopal.\n<\/p>\n
 Shri R.F.Nariman, senior counsel appearing on behalf of the
\nAdministrator, respondent No.1, submitted that Section 7 of the UTI Act,
\n2002 gives effect only to a part of the scheme which must be understood in
\nthe background of the larger scheme envisaged by the Act read as a whole.
\nUnder Section 3 of the Act the statutory successor is the Central
\nGovernment and the share capital vests in the Central Government.  Refund
\nof the share capital is to be made by the Central Government to the
\ncontributors named therein.  It is for this reason that the Central Government
\nsteps in.  Under Section 4, the undertaking (excluding the specified
\nundertaking) vests in the Specified Company.  The specified undertaking
\nvests in the Administrator under Section 5.  This is the scheme of transfer
\nand, therefore, Sections 7 and 18 of the Act must be read harmoniously.  He
\nfurther submitted that even if it is assumed for the sake of argument that the
\nAdministrator acts as an agent of the Central Government, that is immaterial
\nbecause the Administrator and the Specified Company are deemed to be
\n“financial institutions” by reason of Section 18 of the Act read with Section
\n4A of the Companies Act.  In any event, in this case, the facts are quite clear
\nand respondents 1 and 2 have sued for recovery of amounts due to them, and
\nthey have not acted as an agent or as a debenture trustee.\n<\/p>\n
Shri Rakesh Dwivedi, senior advocate appearing on behalf of the UTI
\nTrustee Company  respondent No.2 herein drew our attention to Section 3
\nof the Unit Trust of India Act 2002 and submitted that the aforesaid
\nprovision refers to “the initial capital of the Trust”.  To understand that term
\none must refer to Section 4 of the Unit Trust of India Act, 1963 which
\nprovided for the initial capital of the Trust.  Section 4 aforesaid provided that
\nthe initial capital of the Trust shall be five crores of rupees divided in the
\nform of certificates each of which shall be of such face value as may be
\nprescribed and contributed in the manner hereinafter referred.  Sub-section
\n(2) refers to the contribution to be made by the Reserve Bank of India, the
\nLife Insurance Corporation, the State Bank and the subsidiary banks and
\nother institutions.  Section 22 of the 1963 Act provided that the capital of the
\nTrust in relation to the first unit scheme shall consist of the initial capital, the
\nunit capital of the said scheme, any reserves created for that scheme etc. etc.
\nThus when Section 3(2) of 2002 Act refers to “the initial capital”, it refers to
\nthe initial capital created under Section 4 of the Unit Trust of India Act,
\n1963.\n<\/p>\n
He submitted that under the UTI Act, 2002 the initial capital has to be
\nrefunded by the Central Government. Thereafter Sections 4 and 5 of the UTI
\nAct, 2002 Act deal with the Undertaking of the Trust and the Specified
\nUndertaking of the Trust which vest in the Specified Company and the
\nAdministrator respectively. The Undertaking as well as the Specified
\nUndertaking represent the assets, schemes etc. which were created under
\nvarious Schemes under the Unit Trust of India Act, 1963.  Each of the
\nSchedules represent the business and liabilities etc.   Under Section 3 the
\ninitial capital is refunded in the manner prescribed and the other assets are
\ndivided in the manner provided.  Under the proviso to Section 4 if any
\nbusiness, asset or property is not represented or related to the Undertaking or
\nSpecified Undertaking, it shall vest in the Central Government.  Thus under
\nSection 3 the initial capital is refunded.  Under Sections 4 and 5 the
\nbusiness, assets and properties are divided and while the Specified
\nUndertaking of the Trust vests in the Administrator, the Undertaking vests in
\nthe Specified Company.  Whatever remains vests in the Central
\nGovernment.  This represents a complete scheme under which the entire
\nassets and liabilities are distributed and stand refunded or vested as the case
\nmay be, in accordance with the provisions of Sections 3, 4 and 5.\n<\/p>\n
\tHe submitted that Section 7 no doubt refers to the appointment of
\nAdministrator of the Specified Undertaking for the purpose of taking over
\nthe administration thereof and to carry on the management for and on behalf
\nof the Central Government.  The Central Government has been given powers
\nto issue directions.  He submitted that such control is exercised over every
\nGovernment Corporation.  The provisions of the Act vest the power to
\nadminister in the Administrator, reserving to the Central Government the
\nright to regulate the exercise of its powers and functions.  This does not
\nprevent the Administrator from acting on his own.  As an Administrator he
\nhas power to recover dues owing to the Specified Undertaking.  The very
\nwide powers vested in the Administrator have been enumerated in Section
\n10 of the Act.  He also submitted that in the instant case the Administrator
\nhad acted to recover the amount due to the Specified Undertaking and
\nsimilarly the Specified Company had taken action to recover dues owing to
\nit.  In the instant case there is no dispute that the amounts sought to be
\nrecovered were paid by the Unit Trust of India and those amounts are now
\nsought to be recovered by respondents 1 and  2 in whom the rights vest to
\nrecover the amounts due.\n<\/p>\n
\tThe Learned Additional Solicitor General appearing on behalf of the
\nUnion of India drew our attention to the definition of “public financial
\ninstitution” under Section 2(fa) of the Unit Trust of India Act, 1963 and
\nsubmitted that it includes every financial institution other than the Trust
\nspecified by or under Section 4-A of Companies Act, 1956.  Section 2(e) of
\nthe UTI Act, 2002 defines the “financial institution” as having the same
\nmeaning assigned to it in clause (h) of Section 2 of the DRT Act, 1993.
\nSection 2(h) of the DRT Act, 1993 defines the “financial institution” to
\nmean a public financial institution within the meaning of Section 4-A of the
\nCompanies Act, 1956 and such other institution as the Central Government
\nmay by Notification specify. He, therefore, submitted that High Court was
\nright in holding that Section 18 effected an amendment in Section 4-A of the
\nCompanies Act with the result that instead of “Unit Trust of India” the
\n“Specified Company” and the “Administrator” stood substituted.  They
\nbeing financial institutions have every right to invoke the provisions of the
\nDRT Act.\n<\/p>\n
\tBefore considering the submissions advanced on behalf of the parties,
\nit may be useful to notice some of the provisions of the UTI Act, 2002.  The
\ndefinitions of “financial institution”, “Specified Company”, the “Specified
\nUndertaking” and “Undertaking” are relevant and they define as follows :-
\n” (e) “financial institution” shall have the meaning
\nassigned to it in clause (h) of section 2 of the Recovery of
\nDebts Due to Banks and Financial Institutions Act, 1993;\n<\/p>\n
(h) “specified company” means a company to be formed
\nand registered under the Companies Act, 1956 (1 of
\n1956) and whose entire capital is subscribed by such
\nfinancial institutions or banks as may be specified by the
\nCentral Government, by notification in the Official
\nGazette, for the purpose of transfer and vesting of the
\nundertaking;\n<\/p>\n
(i) “specified undertaking” includes all business, assets,
\nliabilities and properties of the Trust representing and
\nrelatable to the schemes and Development Reserve Fund
\nspecified in the Schedule I;\n<\/p>\n
(l) “undertaking” includes all business, assets, liabilities
\nand properties of the Trust representing and relatable to
\nthe schemes and plans specified in the Schedule II;”
\n\tSections 3 and 4 provide as follows –\n<\/p>\n
“3. Transfer of initial capital.–\n<\/p>\n
(1) On the appointed day, the initial capital of the Trust,
\ncontributed by the Development Bank, the Life Insurance
\nCorporation, the State Bank and the subsidiary banks and
\nother institutions under sections 4 and 4A of the Unit
\nTrust of India Act, 1963, as it stood immediately before
\nthe commencement of this Act, shall stand transferred to,
\nand vest in, the Central Government
\n(2) The initial capital contributed by the Development
\nBank, the Life Insurance Corporation, the State Bank and
\nthe subsidiary banks and other institutions shall be
\nrefunded, by the Central Government, to such extent as
\nmay be determined by it, having regard to the book
\nvalue, the assets and liabilities of the Trust\n<\/p>\n
4. Undertaking of Trust to vest in specified company
\nand specified undertaking of Trust to vest in
\nAdministrator.–\n<\/p>\n
(1) On such date as the Central Government may, by
\nnotification in the Official Gazette, appoint, there shall be
\ntransferred to, and vest in,-\n<\/p>\n
(a) the specified company, the undertaking
\n(excluding the specified undertaking) of the Trust
\nfor such consideration and on such terms and
\nconditions as may be mutually agreed upon
\nbetween the Central Government and the
\nsubscribers to the capital of the specified company;\n<\/p>\n
(b) the Administrator, the specified undertaking of
\nthe Trust<\/p>\n
(2) The decision of the Central Government, as to
\nwhether any business, assets, liabilities or properties
\nrepresent or relate to the undertaking or specified
\nundertaking, shall be final:\n<\/p>\n
Provided that any business, asset or property which is not
\nrepresented or related to the undertaking or specified
\nundertaking, shall vest in the Central Government.”\n<\/p>\n
\tSub-section (1) of Section 5 must also be noticed which provides :-\n<\/p>\n
“5. General effect of vesting of undertaking or
\nspecified undertaking in specified company or
\nAdministrator.–\n<\/p>\n
(1) The undertaking of the Trust which is transferred to,
\nand which vest in, the specified company or the specified
\nundertaking of the Trust, which is transferred to, and
\nwhich vest in, the Administrator, as the case may be,
\nunder section 4, shall be deemed to include all business,
\nassets, rights, powers, authorities and privileges and all
\nproperties, movable and immovable, real and personal,
\ncorporeal and incorporeal, in possession or reservation,
\npresent or contingent of whatever nature and
\nwheresoever situate including lands, buildings, vehicles,
\ncash balances, deposits, foreign currencies, disclosed and
\nundisclosed reserves, reserve fund, special reserve fund,
\nbenevolent reserve fund, any other fund, stocks,
\ninvestments, shares, bonds, debentures, security,
\nmanagement of any industrial concern, loans, advances
\nand guarantees given to industrial concerns, tenancies,
\nleases and book-debts and all other rights and interests
\narising out of such property as were immediately before
\nthe appointed day in the ownership, possession or power
\nof the Trust in relation to the undertaking or the specified
\nundertaking, as the case may be, within or without India,
\nall books of account, registers, records and documents
\nrelating thereto and shall also be deemed to include all
\nborrowings, liabilities, units issued and obligations of
\nwhatever kind within or without India then subsisting of
\nthe Trust in relation to such undertaking or the specified
\nundertaking, as the case may be.”\n<\/p>\n
\tSub-sections 1 to 3 of Section 7 read as under :-\n<\/p>\n
“7. Appointment of Administrator to manage
\nspecified undertaking.–\n<\/p>\n
(1) The Central Government shall, on and from the
\nappointed day, appoint a person or a body of persons, as
\nthe “Administrator of the specified undertaking of the
\nUnit Trust of India” for the purpose of taking over the
\nadministration thereof and the Administrator shall carry
\non the management of the specified undertaking of the
\nTrust for and on behalf of the Central Government
\n(2) The Central Government may issue such directions
\n(including directions as to initiating, defending or
\ncontinuing any legal proceedings before any court,
\ntribunal or other authority) to the Administrator as to his
\npowers and functions as that Government may deem
\ndesirable and the Administrator may apply to the Central
\nGovernment at any time for instructions as to the manner
\nin which he shall conduct the management of the
\nspecified undertaking or in relation to any matter arising
\nin the course of such management
\n(3) Subject to the other provisions of this Act and the
\nSchemes made thereunder and the control of the Central
\nGovernment, the Administrator shall be entitled,
\nnotwithstanding anything contained in any other law for
\nthe time being in force, to exercise, in relation to the
\nmanagement of the specified undertaking, the powers
\nspecified under section 10 including powers to dispose of
\nany property or assets of such specified undertaking
\nwhether such powers are derived under any law for the
\ntime being in force.”\n<\/p>\n
Section 18 which is of considerable significance in this appeal is
\nreproduced below :-\n<\/p>\n
“18. Substitution in Acts, rule or regulation or
\nnotification by specified company or Administrator in
\nplace of Trust.
\nIn every Act, rule, regulation or notification in force on
\nthe appointed day, for the words “Unit Trust of India”,
\nwherever they occur, the words, brackets and figures
\n“specified company referred to in the Unit Trust of India
\n(Transfer of Undertaking and Repeal) Act, 2002” or
\n“Administrator of the specified undertaking of the Unit
\nTrust of India referred to in the Unit Trust of India
\n(Transfer of Undertaking and Repeal) Act, 2002″, as the
\ncase may be, shall be substituted”\n<\/p>\n
It is also necessary to notice the relevant provisions of the Recovery of
\nDebts Due to Banks and Financial Institutions Act, 1993.  Section 2 (g)
\ndefines “debt” as follows :-\n<\/p>\n
“[ (g) “debt” means any liability (inclusive of interest)
\nwhich is claimed as due from any person by a bank or a
\nfinancial  institution or by a consortium of banks or
\nfinancial institutions during the course of any business
\nactivity undertaken by    the bank or the financial
\ninstitution or the consortium under any law for the time
\nbeing in force, in cash or otherwise,  whether secured or
\nunsecured, or assigned, or whether payable under a
\ndecree or order of any civil court or any       arbitration
\naward or otherwise or under a mortgage and subsisting
\non, and legally recoverable on, the date of the
\napplication;]”\n<\/p>\n
\tA “financial institution” under the said Act is defined by Section 2(h)
\nin the following words :-\n<\/p>\n
(i)\ta public financial institution within the meaning of
\nsection 4A of the Companies Act, 1956 (1 of
\n1956);\n<\/p>\n
(ii)\tSuch other institution as the Central Government
\nmay, having regard to its business activity and the
\narea of its operation in India by notification,
\nspecify ;\n<\/p>\n
Section 17 deals with the jurisdiction, powers and authority of the
\nTribunals constituted under the Act.  It reads as under :-\n<\/p>\n
“17. Jurisdiction, powers and authority of Tribunals.-\n<\/p>\n
-(1) A Tribunal shall exeroise, on and from the appointed
\nday, the jurisdiction, powers and authority to entertain
\nand decide applications from the banks and Financial
\ninstitutions for recovery of debts due to such banks and
\nfinancial institutions.\n<\/p>\n
(2) An Appellate Tribunal shall exercise, on and from the
\nappointed day, the jurisdiction, powers and authority to
\nentertain appeals against any order made, or deemed to
\nhave been made, by a Tribunal under this Act.”\n<\/p>\n
 \tSub-sections (1) and (2) of Section 19 are also relevant.  They read as
\nunder :-\n<\/p>\n
“19.\tApplication to the Tribunal.  (1)  Where a bank
\nis a financial institution has to recover any debt from any
\nperson, it may make an application to the Tribunal within
\nthe local limits of whose jurisdiction\n<\/p>\n
(a)\tthe defendant, or each of the defendants where
\nthere are more than one, at the time of making the
\napplication, actually and voluntarily resides or
\ncarries on business or personally works for gain, or\n<\/p>\n
(b)\tany of the defendants, where there are more than
\none, at the time of making the application, actually
\nand voluntarily resides or carries on business or
\npersonally works for gain, or
\n)\tthe cause of action, wholly or in part, arise.\n<\/p>\n
(2)\tWhere a bank or a financial institution, which has
\nto recover the debt from any person, has filed an
\napplication to the Tribunal under sub-section (1) and
\nagainst the same person another bank or financial
\ninstitution also has claim to recover its debt, then, the
\nlater bank or financial institution may join the applicant
\nbank, or financial institution at any stage of the
\nproceedings, before the final order is passed, by making
\nan application to that Tribunal.”\n<\/p>\n
\tSection 34 gives to the Act over-riding effect by providing as
\nfollows:-\n<\/p>\n
“34. Act to have over-riding effect.–(1) Save as
\notherwise provided in subsection (2), the provisions of
\nthis Act shall have effect notwithstanding anything
\ninconsistent (herewith contained in any other law for the
\ntime being in force or in any instrument having effect by
\nvirtue of any law other than this Act.”\n<\/p>\n
(2) The provisions of (his Act or the rules made
\nthereunder shall be in addition to, and not in derogation
\nof, the Industrial Finance Corporation Act, 1948 (15 of
\n1948), the Stale Financial Corporations Act, 1951 (63 of
\n1951), the Unit Trust of India Act, 1963 (52 of 1963), the
\nIndustrial Reconstruction Bank of India Act, 1984 (62 of
\n1984) 2[, the Sick Industrial Companies (Special
\nProvisions) Act, 1985 (1 of 1986) and the Small
\nIndustries Development Bank of India Act, 1989 (39 of
\n1989)].”\n<\/p>\n
\tBefore the High Court the main submission urged on behalf of the
\nappellant was that respondents 1 and 2 herein are not ‘financial institutions’
\nwithin the meaning of DRT Act, 1993.  The respondents, however, relied on
\nSection 11 of the UTI Act 2002 and Section 2(h)(ii)(ii) of the DRT Act to
\ncontend that the aforesaid respondents are ‘financial institutions’ within the
\nmeaning of the term in the DRT Act.  The High Court upheld the contention
\nof the respondents.  Section 18 of the UTI Act, 2002 in terms provide that
\nfor the words “Unit Trust of India”, wherever they occur in any Act, rule,
\nregulation, or notification, the words ” Specified Company” and
\n“Administrator of the Specified Undertaking of the Unit Trust of India” shall
\nbe substituted.  The effect of this provision is that in every Act, rule,
\nregulation or notification the words “Unit Trust of India” are substituted by
\nthe “Specified Company” and the “Administrator of the Specified
\nUndertaking” referred to in the UTI Act, 2002.  It is, therefore, not necessary
\nto pass a separate amending Act or to amend all the rules, regulations or
\nnotifications by adopting an amending procedure.  Section 18 of the UTI
\nAct, 2002 operates by its own force to bring about the substitution.
\nLegislative policy adopted by the Parliament to enact a legislation which
\neffects an amendment in other Acts, rules, regulations, notifications etc. is
\npermissible subject to its legislative competence.  If the enactment brings
\nabout such amendments as is within the legislative competence of the
\nParliament and the statutes, notifications, etc. in which such amendment is
\naffected are also within the legislative competence of the Parliament, the
\nmethod adopted by the Parliament cannot be assailed.   Rather than enacting
\nseveral statutes and numerous amendments of rules, regulations,
\nnotifications etc., the Parliament achieved this purpose by a single
\nenactment.\n<\/p>\n
\tSection 4-A of the Companies Act provides that each of the financial
\ninstitutions specified in sub-section (1) shall be regarded for the purpose of
\nthis Act, as a public financial institution.  The financial institutions specified
\nincluded the “Unit Trust of India” established under Section 3 of the UTI
\nAct, 1973.  By operation of Section 18 of the UTI Act, 2002, “Unit Trust of
\nIndia” is substituted by the “Specified Company” or “Administrator of the
\nSpecified Undertaking”, as the case may be.  Thus, the “Specified
\nCompany” and the “Administrator of the Specified Undertaking” must be
\ndeemed to be financial institutions specified in sub-section (1) of Section 4-
\nA of the Companies Act.\n<\/p>\n
\tThis takes us to the definition of ‘financial institution’ under the DRT
\nAct, Section 2(h) whereof defines a “financial institution” to mean a public
\nfinancial institution within the meaning of Section 4-A of the Companies
\nAct.  Consequently by reason of deemed amendment of Section 4-A of the
\nCompanies Act, the “Specified Company” and the “Administrator of the
\nSpecified Undertaking” come within the definition of financial institutions
\nas defined under Section 2(h) of the DRT Act.\n<\/p>\n
\tMr. Venugopal submitted that under Section 18 of the UTI Act, 2002
\nthe substitution is of “Specified Company” or “Administrator of the
\nSpecified Undertaking”, “as the case may be”.   According to him this brings
\nabout an uncertainty and in each case it has to be discovered as to whether
\none or the other is substituted.  According to him Section 18 which in a
\nsense is a definition clause should not permit such uncertainty.  We find no
\nmerit in this submission.  By reason of Section 18 of the UTI Act, 2002, in
\nplace of Unit Trust of India, both respondents 1 and 2 stand substituted.
\nBoth are entitled to sue as financial institutions and the question whether
\nthey have an enforceable claim must be decided in the facts and
\ncircumstances of each case.  There is no uncertainty because the assets
\npossessed by these two identities are clearly enumerated in Schedules I and
\nII of the UTI Act, 2002.  We, therefore, do not find that the use of the words
\n“as the case may be” introduces any element of uncertainty.
\n\tThe next question is whether respondents 1 and 2 are seeking to
\nrecover the debts owing to them or whether they are acting as agent on
\nbehalf of their principals, or as trustees.\n<\/p>\n
The Scheme of the Act discloses that the Unit Trust of India created
\nunder the Unit Trust of India Act, 1963 ceased to exist and in its place the
\nSpecified Company and the Administrator of the specified undertaking of
\nthe Trust were created which took charge of all the properties, business
\nassets, rights etc. of the erstwhile Unit Trust of India.  The initial capital of
\nthe Trust stood transferred to and vested in the Central Government under
\nSection 3(1) of the Act.  Sub-section (2) however, mandated that the initial
\ncapital contributed by the named contributors shall be refunded by the
\nCentral Government to such extent as may be determined by it.  Section 21
\nprovides for the repeal of the Unit Trust of India Act, 1963 and the
\ndissolution of its Board of Trustees.\n<\/p>\n
Having done so UTI Act of 2002 by Section 4 thereof vested in the
\nspecified company the undertaking of the Trust (excluding the specified
\nundertaking) for such consideration and on such terms and conditions as
\nmay be mutually agreed upon between the Central Government and the
\nsubscribers to the capital and the specified company.  The decision of the
\nCentral Government as to whether any business, assets, liabilities or
\nproperties represent or relate to the undertaking or specified undertaking is
\nmade final.  If there remained any business, asset or property which was not
\nrepresented or related to the undertaking or specified undertaking, that
\nvested in the Central Government.  In this manner, the erstwhile Unit Trust
\nof India ceased to exist and in its place a specified company and an
\nAdministrator of the specified undertaking of the Trust came into existence.
\nThe transfer and vesting of assets, rights etc. in these two bodies is in the
\nwidest possible terms as would be obvious from a plain reading of Section 5
\nof the UTI Act, 2002.  It provides that what is transferred and vested in the
\nspecified company or the Administrator of the specified undertaking, shall
\nbe deemed to include:-\n<\/p>\n
“all business, assets, rights powers, authorities and privileges
\nand all properties, movable and immovable, real and personal,
\ncorporeal and incorporeal, in possession or reservation, present
\nor contingent of whatever nature and wheresoever situate
\nincluding lands, buildings, vehicles, cash balances, deposits,
\nforeign currencies, disclosed and undisclosed reserves, reserve
\nfund, special reserve fund, benevolent reserve fund, any other
\nfund, stocks, investments shares, bonds debentures, security,
\nmanagement of any industrial concern, loans advances and
\nguarantees given to industrial concerns, tenancies, leases and
\nbook-debts and all other rights and interests arising out of such
\nproperty as were immediately before the appointed day in the
\nownership, possession or power of the Trust in relation to the
\nundertaking or the specified undertaking, as the case may be”.\n<\/p>\n
\tThus the transfer and vesting is complete. All contracts, deeds bonds,
\nguarantees, other instruments and working arrangements subsisting
\nimmediately before the appointed day cease to be enforceable against the
\nerstwhile Trust but shall be of as full force and effect against or in favour of
\nthe Specified Company or the Administrator, as the case may be, in which
\nthe undertaking or specified undertaking has vested, and enforceable as fully
\nand effectually as if instead of the Trust, the Specified Company or the
\nAdministrator, as the case may be, had been named therein or had been a
\nparty thereto.  Similarly, all unit schemes taken by the Board of the erstwhile
\nTrust are deemed to have been taken by the Specified Company or the
\nAdministrator as the case may be.\n<\/p>\n
\tHaving vested the undertaking of the Trust in the Administrator,
\nSection 7 of the Act provides for the appointment of the Administrator of the
\nspecified undertaking who is entrusted with the task of taking over the
\nadministration thereof and to carry on the management of the specified
\nundertaking of the Trust for and on behalf of the Central Government.  sub-
\nsection (2) of Section 7 empowers the Central Government to issue such
\ndirections to the Administrator as to his powers and functions as the
\nGovernment may deem desirable.  The Administrator may also seek
\ndirections from the Central Government as to the manner in which he shall
\nconduct the management of the specified undertaking or in relation to any
\nmatter arising in the course of such management.\n<\/p>\n
 Much was sought to be made of the use of the words “carry on the
\nmanagement of the specified undertaking of the Trust for and on behalf of
\nthe Central Government” in Section 7 of the UTI Act, 2002.  It was also
\nemphasized that under sub-section (2) of Section 7 the Central Government
\nhas been authorized to issue directions to the Administrator as to his powers
\nand functions and similarly permitted the Administrator to seek directions of
\nthe Central Government as to the manner in which he shall conduct the
\nmanagement of the specified undertaking or in relation to any matter arising
\nin the course of such management.  The power to issue directions of this
\nnature are to be found in several other statutes which create a Government
\ncooperation or other legal entity.   The power to issue directions vested in
\nthe Central Government is with a view to provide policy guidance to the
\nAdministrator.  The fact that the management is carried on by the
\nAdministrator of the specified undertaking on behalf of the Central
\nGovernment which is authorized to issue directions to the Administrator
\ndoes not detract from the fact that the “specified undertaking” vests in the
\nAdministrator.  The wide sweep of the language employed in Section 5 of
\nthe Act leaves no manner of doubt that the vesting in the Administrator or in
\nthe Specified Company is complete.  The powers vested in the Administrator
\nunder Section 10 of the Act cover almost every power of management and
\nadministration.  Section 10 (1) (b) in particular authorizes him on the advice
\nof the Board of Advisors to invest, acquire, hold or dispose of securities and
\nto exercise and enforce all powers and rights incidental thereto including
\nprotection or realization of such investment etc.  Thus, it is a part of the
\npower of management vested in the Administrator to invest as well as to
\nrealize such investments.  Apparently therefore, if any amount is owing to
\nthe specified undertaking, the Administrator has the authority to take all
\nnecessary steps to realize any amount due to the specified undertaking.  The
\nstatute vests this power in the Administrator.  It cannot therefore by any
\nstretch of imagination be assumed that the Administrator does not possess
\nthe power to make recoveries in course of management of the specified
\nundertaking.  The mere fact that the Central Government may give him
\ndirections or he may seek instructions from the Central Government of the
\nnature contemplated by sub-section (2) of Section 7, does not mean that the
\npower exercised by the Administrator are not the powers vested in him by
\nlaw.  Subject to such directions as may be given under the aforesaid sub-
\nsection, it is the Administrator who must exercise his power of management
\nand administration.  Apparently therefore in recovering dues owing to the
\nspecified undertaking, the Administrator exercises the powers vested in him
\nunder the Act in his own right since the undertaking vests in him, and the
\nAct vests in him wide powers of management and administration which
\ninclude the power to recover dues owing to the specified undertaking.  It is,
\ntherefore, futile to contend that the Administrator acts as an agent of the
\nCentral Government.  He acts in exercise of the powers vested in him by the
\nstatute and in the manner prescribed by the statute.
\n\tEven assuming that the Administrator manages the specified
\nundertaking on behalf of the Central Government, that will not make any
\ndifference.  The amounts sought to be recovered are allegedly owing to the
\nSpecified Company and the Administrator, who as we have found are
\n“financial institutions” within the meaning of that term in the DRT Act,
\n1993.  Thus, the Specified Company and the Administrator of the Specified
\nCompany are not seeking to recover any dues owing to the Central
\nGovernment, and therefore, they cannot be held to be acting on behalf of the
\nCentral Government.  In their own right they are seeking to recover the
\namounts due to them in exercise of status and power conferred upon them by
\nstatute.  So viewed, the nature of control of the Central Government over
\nthem is wholly irrelevant in considering the question of jurisdiction of the
\nDebts Recovery Tribunal to entertain such a claim.
\n\tSimilarly, the vesting of the undertaking (excluding the specified
\nundertaking) in the Specified Company is also complete in terms of Section
\n5 of the Act.  Being a company, it is a distinct legal entity and, therefore,
\nmust exercise its authority in accordance with law.  Advisedly, the
\nlegislature did not vest the specified undertaking in a company as it has done
\nin the case of undertaking other than specified undertaking, because in so far
\nas the specified undertaking of the Trust is concerned, the Act contemplates
\nthe redemption of all the schemes and the payment of entire amount to
\ninvestors.  After this is achieved, the Administrator in terms of Section 8 of
\nthe Act shall vacate his office and forthwith deliver to the Central
\nGovernment, or any institution or officer specified by it, possession of all
\nassets and properties representing and relatable to the specified undertaking
\nwhich are in his possession, custody and control.  The Administrator of
\nspecified undertaking is, therefore, constituted as a statutory authority under
\nthe Act with wide powers and functions vests in him in relation to the
\nspecified undertaking which also stand vested in him.  When he seeks to
\nrecover dues owing to the specified undertaking he exercises his own
\nauthority as Administrator and assumes powers which vests in him by law.
\nThere is nothing in the Act which may justify the submission that the
\nspecified company acts as a trustee.  It manages and executes the schemes
\ncontained in Schedule I of the Act in accordance with the provisions of the
\nAct.\n<\/p>\n
\tLearned counsel for the appellant submitted that under the Banking
\nRegulation Act, 1949 Section 6 authorises a banking company to engage in
\nbusiness even as an executor.  According to him, an executor cannot recover
\ndues under the provisions of the DRT Act.  He placed reliance on the
\njudgment of the Supreme Court in State Bank of India Vs. Special Secretary
\nLand & Land Revenue & Reforms & Land & Land Utilisation Deptt. of W.B.
\nand Ors. 1995 Supp (4) SCC 30 particularly paragraph 5 thereof.  This Court
\nconsidered its earlier decision in Holdsworth (Supra).  The question which
\narose for consideration of this Court was whether Section 19 of the Urban
\nLand (Ceiling and Regulation) Act, 1976 was attracted to vacant land of a
\nTrust created by a private individual, if a Bank accepted administration of
\nsuch Trust and became a trustee in the course of carrying on its permitted
\ncommercial activity.  The decision in that case turned on the meaning of the
\nwords “to hold” under Section 2(l) of the Act and interpreting the said term,
\nthis Court held that the vacant land owned or possessed as owner or in
\ncertain other capacities by Central Government or others as specified in sub-
\nsection (1) of the Section were exempted from the applicability of the
\nprovisions in Chapter III of the Act.  Clause (iii) of sub-section (1)
\nmentioned banks falling within the meaning of the explanation given thereto
\nas those which fell in exempted categories.  The decision therefore, rested on
\nthe meaning given to the term “to hold” in Section 19 of the Act.
\n\tHaving examined the provisions of the UTI Act, 2002 we have no
\ndoubt that vesting in the Administrator or the Specified Company is
\ncomplete. The concept of mere vesting of management cannot be imported
\ninto the scheme of the Act.  The Administrator and the Specified Company
\nwere therefore, fully authorized in law to recover the dues from the
\nappellants as “financial institutions”.  The Debts Recovery Tribunal had
\ntherefore undoubted jurisdiction to entertain their claims.
\nOn the basis of the materials placed before us there is nothing to
\nsuggest that they were acting either as agents of the Central Government or
\nas trustees.  We therefore, hold that they have acted in the exercise of power
\nvested in them by the UTI Act, 2002 and in their own right.
\nThe High Court was, therefore, right in dismissing the writ petition
\npreferred by the appellants challenging the jurisdiction of the Debts
\nRecovery Tribunal. We find no merit in this appeal and the same is,
\ntherefore, dismissed but without any order as to costs.<\/p>\n","protected":false},"excerpt":{"rendered":"
Supreme Court of India Southern Petrochemicals … vs Administrator Of Specified … on 13 December, 2006 Author: B Singh Bench: B.P. Singh, Altamas Kabir CASE NO.: Appeal (civil) 5782 of 2006 PETITIONER: Southern Petrochemicals Industries Corporation Ltd RESPONDENT: Administrator of Specified Undertaking of Unit Trust of India and others DATE OF JUDGMENT: 13\/12\/2006 BENCH: B.P. […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[30],"tags":[],"class_list":["post-120794","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"\nSouthern Petrochemicals ... vs Administrator Of Specified ... on 13 December, 2006 - Free Judgements of Supreme Court & High Court | Legal India<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.legalindia.com\/judgments\/southern-petrochemicals-vs-administrator-of-specified-on-13-december-2006\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Southern Petrochemicals ... vs Administrator Of Specified ... on 13 December, 2006 - 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