Research › Search › Judgment

Calcutta High Court · body

2014 DIGILAW 874 (CAL)

Indian Overseas Bank v. Julien Educational Trust

2014-09-10

SANJIB BANERJEE

body2014
JUDGMENT : Sanjib Banerjee, J. This petition under Article 227 of the Constitution is by a bank which has been subsequently impleaded in a suit filed in 2007 for specific performance of a contract relating to the purchase of an immovable property. The bank is the 12th defendant in the suit and the bank was impleaded in the year 2011 along with the defendant nos.9, 10 and 11 as added defendants. 2. It is the banks case that in connection with credit facilities accorded to a constituent, the defendant nos.9, 10 and 11 in the suit had furnished corporate guarantees, promising to make good the default on the part of the principal debtor. It is the banks further case that the defendant nos.9, 10 and 11 are joint owners of the relevant property and had mortgaged the same with the bank in connection with the corporate guarantees executed and the credit facilities granted by the bank to its constituent. 3. The bank says that upon the principal debtor failing to repay the bank despite demand, the bank took steps under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 against the secured asset. The bank claims to have issued due notice under Section 13(2) of the Act and, thereafter, resorted to measures under Section 13(4) thereof. 4. The bank claims that the bank was impleaded as a party to the suit without previous notice. The bank asserts that shortly after it came to know that it had been added as a party, the bank applied for deletion of its name from the array of parties in the suit: in effect, seeking the dismissal of the suit against the bank. It is the order of rejection of such application that is challenged herein. The bank had also filed its written statement, but such matter is utterly irrelevant for the present consideration. 5. The bank says that by virtue of Section 34 of the said Act of 2002, any measures taken by a secured creditor under Section 13(4) of the said Act may be complained against, by any person aggrieved, by way of an appeal under Section 17 of the said Act before the appropriate Debts Recovery Tribunal. 5. The bank says that by virtue of Section 34 of the said Act of 2002, any measures taken by a secured creditor under Section 13(4) of the said Act may be complained against, by any person aggrieved, by way of an appeal under Section 17 of the said Act before the appropriate Debts Recovery Tribunal. The bank suggests that by virtue of the expression in Section 34 of the Act, "is empowered by or under this Act to determine", no civil court has the jurisdiction to entertain any suit or decide any proceedings in respect of such matter. The bank says that once the bank has invoked Section 13(4) of the said Act, whether or not such action is justified, the only authority which may entertain a complaint in respect thereof is the appropriate Tribunal under Section 17 of the Act and not any civil court. 6. The bank refers to a judgment reported at (2014) 1 SCC 479 and another reported at (2014) 3 WBLR 263 for the discussions therein on the ambit and width of the relevant expression in Section 34 of the said Act and the incompetence of civil courts to adjudicate upon the matters covered thereby consequent thereupon. 7. The plaintiff is represented and claims that since the suit as instituted was perfectly in order, the amendments, which were allowed to incorporate subsequent events and chase the later claimants to the property, cannot be questioned by citing Section 34 of the Act of 2002. The plaintiffs original claim in the suit of the year 2007 was that the defendant nos.1 to 8 had agreed to sell the relevant property to the plaintiff. In such suit for specific performance of the contract, an initial interlocutory order of injunction was obtained. The injunction was vacated by this court in an appeal or revision upon it being asserted before this court that the property had been sold by the defendant nos.1 to 8 to the defendant nos.9 to 11 (who were not parties to the suit then) and the defendant nos.9 to 11 had apparently mortgaged the same with the petitioner bank and the petitioner bank had proceeded against the mortgaged asset under the said Act of 2002. 8. The plaintiff applied thereafter for impleading the alleged subsequent purchasers of the property and the alleged mortgagee thereof. 8. The plaintiff applied thereafter for impleading the alleged subsequent purchasers of the property and the alleged mortgagee thereof. Though the bank claims that the bank had no previous notice of the plaintiffs application under Order I Rule 10 of the Code to implead the bank or the plaintiffs application for the consequential amendment of the plaint, the plaintiff says that the bank had due notice thereof. Nothing, however, turns on such dispute. 9. The plaintiff says that since there was a subsisting order of injunction in the suit, any transfer of the property during the currency of the injunction would be void and any creation of mortgage in respect thereof would be fraudulent. The plaintiff says that once allegations of fraud have been levelled by way of an amendment on the tenable ground that the transfer was sought to be effected in the teeth of the order of injunction, the civil court would not lose jurisdiction over the matter notwithstanding Section 34 of the said Act of 2002. In support of such contention, the plaintiff relies on a single Bench judgment reported at AIR 2011 Bom 144 and places paragraph 18 thereof. The relevant passage seeks to draw a line of demarcation between what reliefs may be exclusively dealt with by a Debts Recovery Tribunal under Section 17 of the Act of 2002 and what reliefs in a suit may be retained by the civil court. However, the judgment may no longer be regarded as good law in view of the later Supreme Court judgment relied upon by the petitioner herein as recorded above. 10. The said Act of 2002 has been held to be intra virus the Constitution and Section 34 of the Act has also been held to be valid. Section 34 of the Act contemplates that not only would matters that have been carried before a Debts Recovery Tribunal or Appellate Tribunal under Sections 17 and 18 of the said Act of 2002 be prohibited from being canvassed before a civil court by way of a suit or like proceedings, but whatever the Debts Recovery Tribunal or Appellate Tribunal is empowered to adjudicate upon cannot be carried for adjudication before a civil court. 11. The question that arises in the present case is as to purpose behind the petitioner bank being impleaded in the suit. 11. The question that arises in the present case is as to purpose behind the petitioner bank being impleaded in the suit. The plaintiff asserts a right in respect of the relevant immovable property and claims to have enjoyed an injunction in respect thereof - in addition to lis pendens - and contends that since the transfer of the property by the original defendants to the defendant nos.9, 10 and 11 was during the currency of the injunction, no valid mortgage in respect of the property could have been created in favour of the petitioner bank. In other words, the plaintiff seeks to assert, inter alia, by incorporating reliefs (aaa) and (aaaa) in the plaint, that the added defendant nos.9, 10 and 11 had no authority to transfer the property to the bank and, as a consequence, the bank had no right to proceed against the same. 12. The next question that arises is whether such matter can be (or could have been) canvassed before an appropriate Debts Recovery Tribunal under Section 17 of the Act of 2002. Section 17 of such Act permits any person aggrieved by any of the measures referred to in Section 13(4) of the Act taken by the secured creditor or its authorised officer to carry an appeal to the appropriate Debts Recovery Tribunal. In view of such provision, it is possible that the plaintiff herein may question (or could have questioned) the propriety of the bank proceeding against the alleged secured asset before an appropriate Tribunal under Section 17 of the said Act. Therefore, the very issue that the plaintiff seeks to be adjudicated upon against the bank in the suit is a matter which is (or was) capable of being carried under Section 17 of the Act of 2002 to the appropriate Debts Recovery Tribunal. 13. Section 34 of the Act does not only prohibit a civil court from entertaining any matter which has been carried to a Debts Recovery Tribunal or Appellate Tribunal under Sections 17 and 18 of the Act of 2002; it goes much further than that. As long as a Debts Recovery Tribunal or an Appellate Tribunal is empowered to adjudicate on any matter, irrespective of whether such matter has been carried to either Tribunal, Section 34 of the Act prohibits the adjudication thereof - and the very receipt of the lis - by a civil court. 14. As long as a Debts Recovery Tribunal or an Appellate Tribunal is empowered to adjudicate on any matter, irrespective of whether such matter has been carried to either Tribunal, Section 34 of the Act prohibits the adjudication thereof - and the very receipt of the lis - by a civil court. 14. Paragraph 24 of the recent judgment of the Supreme Court relied upon by the bank herein makes little distinction between what matters should be exclusively decided by the Debts Recovery Tribunal and what matters ought to be left before a civil court. As in the present case, a suit may be instituted in respect of an immovable property, whether claiming declaration as to title or specific performance of a contract for sale thereof or the like. If a stranger secured creditor proceeds, during the pendency of the suit, to take measures against the subject immovable property under Section 13(4) of the said Act of 2002, the plaintiff cannot seek the addition of the secured creditor as a party or amend the plaint to include the subsequent event of the secured creditor having taken measures under the said Act of 2002 and challenge the same. That is the implication of Section 34 of the said Act of 2002. 15. Section 34 of the said Act has two parts: in its first limb it prohibits any civil court from entertaining "any suit or proceeding in respect of any matter which a Debts Recovery Tribunal or the Appellate Tribunal is empowered by or under this Act to determine"; in its second part the provision prohibits the grant of any injunction by any court or other authority "in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act or under the Recovery of Debts due to Banks and Financial Institutions Act, 1993." 16. Thus, a suit instituted in respect of an immovable property prior to a secured creditor taking measures against such property under Section 13(4) of the said Act of 2002 cannot take within its fold, by amendment of the plaint or otherwise, any subsequent claim against the secured creditor in respect of the measures taken by such secured creditor under Section 13(4) of the said Act of 2002 qua the relevant property. Even if it were conceded that an amendment incorporated in the plaint relating to the pending suit to challenge the subsequent measures taken by a secured creditor in respect thereof under Section 13(4) of the said Act of 2002 may not amount to the institution of a fresh suit against the secured creditor, the civil court will have no authority, by virtue of the second limb of Section 34 of the said Act of 2002, to pass any injunction or grant any effective relief in respect of such measures taken by the secured creditor. 17. As has been observed in the judgment of this court placed by the bank, the old axioms pertaining to civil jurisprudence have now to be unlearnt. A suit that was perfectly justified at the time of its institution may subsequently be regarded as not maintainable if long after the institution of the suit a question arises as to whether a measure taken by a secured creditor in respect of an asset which is the subject matter of the suit has been appropriate or not. Similarly, as observed in the judgment of this court referred to above, it is now possible to carve out a part of a plaint for rejection. Though such concept is anathema to Order 7, Rule 11 of the Code, new laws require newer concepts to be discovered and applied under Section 151 of the Code as the only avenue therefor. 18. Though judicial officers cannot claim monopoly of knowledge of law, the increasing abdication of the judiciarys once exclusive domain in the modern mantra of tribunalisation warrants complex issues as to laws of inheritance, partition and specific relief, to name a few, to be dealt with exclusively by the Debts Recovery Tribunal which may not be manned by legally-trained officials. But that is an entirely different matter altogether. 19. Since it cannot be disputed in this case that the grievance of the plaintiff qua the property in question and the measures taken by the petitioner bank under Section 13(4) of the said Act of 2002 could have been or can be the subject matter of a petition under Section 17 of the said Act before the appropriate Debts Recovery Tribunal, the civil court stood denuded of its authority, by virtue of Section 34 of the Act of 2002, from receiving the claim or adjudicating thereupon. As a consequence, the banks application for deletion of the name of the bank as a party to the suit is allowed and the order impugned set aside. However, it is observed that the suit may continue as against the other defendants. 20. C.O. 2002 of 2013 and C.A.N. 12385 of 2013 are disposed of as above without any order as to costs. C.O. 2002 of 2013 and C.A.N. 12385 of disposed of.