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2017 DIGILAW 710 (GAU)

Meghalaya Gases Ltd v. Union of India

2017-06-01

KALYAN RAI SURANA

body2017
JUDGMENT AND ORDER : 1. Heard Mr. R.L. Yadav, the learned counsel for the petitioners and Mr. S.P. Sarma, the learned counsel for the respondent No. 3. None appears on call for the other respondents. 2. By filing this application under Article 227 of the Constitution of India, the petitioners have challenged the order dated 30.10.2013 passed by the learned Debt Recovery Tribunal, Guwahati (for short ‘the DRT’) in O.A. No. 211/2010, on the ground that the respondent No. 3 herein is not a financial institution or a Bank within the meaning of Section 2(d), Section 2(e), Section 2(h) & Section 2(i) of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (hereinafter referred to as ‘the 1993 Act’). 3. The respondent No. 3, namely, Meghalaya Industrial Corporation Limited have filed an original application before the DRT claiming recovery of a sum of Rs. 45,49,962/- towards principal as on 30.09.2010 and Rs. 50,19,519/- towards interest till 30.09.2010 together with accrued interest at the rate of 14.75% per annum calculated up to the date of realization on actual payment. The said application was registered as OA No. 211/2010. On receipt of notice for appearing in the said application, the petitioner No. 1 filed petition No. 260 dated 18.04.2011 questioning the maintainability of the OA No. 211/2010. The learned DRT instead of deciding the preliminary issues, fixed the case on 22.11.2010 for filing written statement by the defendants. In course of time, the defendants filed their written statement and in the same also they took plea over the preliminary issue of maintainability. On 25.01.2012, once again, a petition was filed before the DRT to hear the matter on preliminary issue of jurisdiction. However, the DRT, took a view that as there is no provision for hearing on preliminary issue under the Act, the preliminary issue of jurisdiction would be taken up at the time of final hearing. Similar prayer, once again, was made by the petitioner No. 1 on 22.02.2012 and on its rejection, the petitioner had approached this Court by filing C.R.P. No. 13/2012 challenging the said dismissal. Thereafter, this Court by an order dated 04.10.2012 directed the DRT to decide the preliminary issue. Similar prayer, once again, was made by the petitioner No. 1 on 22.02.2012 and on its rejection, the petitioner had approached this Court by filing C.R.P. No. 13/2012 challenging the said dismissal. Thereafter, this Court by an order dated 04.10.2012 directed the DRT to decide the preliminary issue. Accordingly, the preliminary issue was heard and the same was decided by the order dated 30.10.2013 dismissing the petition filed by the petitioner on the point of jurisdiction by holding that the respondent No. 3 herein is a financial institution and the Tribunal has the jurisdiction to entertain the application. Challenging the said order, the present revision has been filed under Article 227 of the Constitution of India. 4. The learned counsel for the petitioner has referred to the relevant provisions of the Act viz. Section 2(d), 2(e), Section (h) and Section (i) and Section 17 & 19 of the 1993 Act. He has referred to the provisions of Section 4A of the Companies Act, 1956 and also to the provisions of Section 9 of the Industrial Development Bank of India Act, 1964 (for short ‘the IDBI Act’). It is submitted that the respondent No. 3 has not been able to produce any notification under Section 4A of the Companies Act or any other provisions of law by virtue of which it has been specified that the respondent No. 3 is a financial institution. It is submitted that the respondent No. 3 had relied on Notification No. F. No. 11-2/75-IF-II dated 05.11.1976, which reads as follows: “In pursuance of sub-clause (i) of clause (a) and clause (c) of sub-section (1) of section 9 of the Industrial Development Bank of India Act, 1964 (18 of 1964), the Central Government hereby notifies the following institutions for the purposes of the said sub-clause and clause, namely:- 1. Haryana State Industrial Development Corporation Ltd. 2. Himachal Pradesh Mineral & Industrial Development Corporation Ltd. 3. Meghalaya Industrial Development Corporation Ltd.” 5. It is submitted that the second letter on which the respondent No. 3 has relied upon is a letter No. DFIC-SIDC dated 08.02.1988. By the said letter addressed to the under Secretary to the Govt. Haryana State Industrial Development Corporation Ltd. 2. Himachal Pradesh Mineral & Industrial Development Corporation Ltd. 3. Meghalaya Industrial Development Corporation Ltd.” 5. It is submitted that the second letter on which the respondent No. 3 has relied upon is a letter No. DFIC-SIDC dated 08.02.1988. By the said letter addressed to the under Secretary to the Govt. of India, recommendation was made for extension of the provisions of Section 29, 30, 31, 32 and 32A to 32G of State Financial Corporation Act, 1951 to the respondent No. 3 requesting that the Central Government may issue necessary notification under Section 46(i) of the State Financial Corporation Act, 1951. 6. Pursuant thereto, the Govt. of India vide notification No. 6(1)/88-IF-II dated 06.04.1988, in exercise of powers conferred under Section 46 of the State Financial Corporation Act, 1951 directed that the provision of Sections 29, 30, 31, 32 and 32A to 32G of the said Act shall apply to the respondent No. 3. It is submitted that the DRT, in the impugned order, had heavily relied upon the case of Mrs. Punam Wangkhem Singh Bhatia vs. The Manipur Industrial Development Corporation, Imphal and Others being WP (C) No. 561/2012 disposed of by the Hon’ble Single Bench of this Court vide judgment dated 10.09.2012, wherein this Court has refused to interfere with the findings of the DRT as well as Debts Recovery Appellate Tribunal, Kolkata and took cognizance of the fact that both the said courts had duly took note of the arguments advanced by the parties and the issues have been answered in negative, therefore, this Court did not find any merit in the said petition and it was dismissed. It is submitted that in the said case, there was a categorical reference to the arguments advanced by the learned counsel for the respondent corporation therein that the corporation was a financial institution in terms of the notification dated 18.04.1988 issued by the Govt. of India, Ministry of Finance, Department of Economic Affairs (Banking Division) and, as such, it is submitted that the facts of the said case is quite different from the facts in the present case, where there is no notification issued by the Ministry of Finance, Government of India under Section 4(A) of the Companies Act to notify the respondent No. 3 as a financial institution. Hence, the learned counsel for the petitioner prays that the present revision be allowed as the DRT had no jurisdiction to adjudicate the claim, as it was not a financial institution within the meaning of the Act. 7. In support of his argument, the learned counsel for the petitioner had relied on the case of HP State Industrial Development Corporation Ltd. vs. Kesri Roller Flour Mills and Others, AIR 2002 HP 34 wherein the High Court of Himachal Pradesh did not recognise the HP State Industrial Corporation Ltd. as a financial institution and proceed with the trial of the suit. 8. Per contra, the learned counsel for the respondent No. 3, while opposing this revision has submitted that by the order dated 04.10.2012 passed by this Court in C.R.P. No. 13/2012, this Court had relegated the parties to agitate their grievance before the DRT therefore, a decision given on merit must be assailed only on appeal under the 1993 Act as it provides for alternative efficacious remedy and therefore, the present revision ought not been entertained. It is further submitted that the respondent No. 3/company is a State Corporation which is conferred with the powers of the State Financial Corporation Act, 1951 by virtue of the notification dated 06.04.1988, as referred to above and there is no doubt that the respondent No. 3/company is dealing with the business of private financial assistance to the industrial entrepreneurs and they are required to recover the same from the defaulted borrower. It is further submitted that in view of the notification dated 5.11.1976, wherein it was duly notified under sub Clause (I) of Clause (a) and Clause(c) of Sub-Section 1 of Section 9 of the IDBI Act, 1964 that there is no requirement of fresh notification under the Sub-Section 2 of Section 4(A) of the Companies Act, 1956 because by the aforesaid notification dated 5.11.1976, it is implied that the respondent No. 3/ company being registered under the Central Act, i.e. State Financial Corporation Act, 1951, it satisfies the proviso appended to Sub-Section 2 of Section 4A of the Companies Act, 1956. It is further submitted that notwithstanding that the respondent No. 3 was a financial institution, the respondent No. 3 is also conferred with the powers of the State Financial Corporation Act, 1951 and only in view of the stay granted in respect of the proceedings before the DRT, the respondent No. 3 has not been able to exercise it powers conferred under the State Financial Corporation Act, 1951 to initiate a proceeding against the petitioner in the present revision. 9. Having considered the rival arguments advanced by the learned counsel for both sides and on perusal of the various provisions as cited by the learned counsel for the parties, this Court has observed that in the present case in hand, there is no record of any notification being issued by the Central Government countering the respondent No. 3, namely, Meghalaya Industrial Development Corporation Ltd. is with the status of a financial institution within the meaning of Section 4A (1) or 4A (2) of the Companies Act, 1956. Therefore, if the arguments advanced by the learned counsel for the respondent No. 3 would be accepted, it would be only the basis of inference derived from the notification dated 5.11.1976 that the respondent No. 3 is a financial institution. On reading of Section 9 of the IDBI Act, 1964, it appears that Section 9 is under Chapter-IV under the heading of Business of the Development Bank, inter-alia empowering the said development bank to grant loans and advance to any State Financial Corporation under the powers conferred by Section 9 (1)(a)(i) of the Act. 10. In terms of the notification dated 5.11.76, the Central Government had invoked the powers under Sub Clause-1 of Clause (a) and Clause (c) of Sub Section (1) of Section 9. 10. In terms of the notification dated 5.11.76, the Central Government had invoked the powers under Sub Clause-1 of Clause (a) and Clause (c) of Sub Section (1) of Section 9. The said provisions, inter-alia, permits the Industrial Development Bank of India to grant loans and advances to the Industrial Finance Corporation, any State Financial Corporation or any other financial institution, which may be approved by the Board in this behalf by way of refinance of any loans or advances granted to industrial concerns by such Corporation or institution which are repayable within a period not exceeding twenty-five years; which may be approved by the Board in this behalf by way of refinance of any loans or advances granted to industrial concerns by such Corporation or institution which are repayable within a period not exceeding twenty-five years, further authorising the said Development Bank to safeguard the loans taken by industrial concerns from any scheduled bank or State Co-operative Bank or the Industrial Finance Corporation or any State Financial Corporation or any other financial institution which may be approved by the Board in this behalf. 11. Therefore, in the opinion of this Court, the said notification dated 5.11.1976 to notify the respondent No. 3 was only for the purpose enabling the said Industrial Development Bank of India to do its business with the Meghalaya Industrial Development Corporation Ltd. In the opinion of this Court, unless the said notification was issued by the Government of India, Department of Revenue & Banking, the then IDBI could not have done any business with the respondent No. 3 corporation. 12. Nothing has been placed on record to show that the notification issued pursuant to Section 9 of the IDBI Act, 1964, ipso facto gives a status of financial institution to the respondent No. 3/company under section 4A of the Companies Act, 1956. 13. In the opinion of this Court, a provision contained in the statute must be read in the context of the said Act only. The principle of golden rule of interpretation is required to be followed by reading the statute as a whole. 13. In the opinion of this Court, a provision contained in the statute must be read in the context of the said Act only. The principle of golden rule of interpretation is required to be followed by reading the statute as a whole. The Companies Act, 1956 or the IDBI Act, 1964 do not contain any provision by virtue of which notification issued under Section of the IDBI Act would confer the status of a company under Section 4A of the Companies Act, 1956 or to confer the status of financial institution to the institution which has been notified by the Central Government in exercise of power conferred under Section 9 of IDBI Act, 1964. 14. Hence, in the absence of any specific notification under Section 4A of the Companies Act, 1956, this Court is not inclined to accept the arguments advanced by the learned counsel for the respondent No. 3 that the notification dated 5.11.1976 and 06.04.1988 would have a cumulative effect of granting a status of financial institution to the respondent No. 3 and that no specific notification was required under Section 4A of the Companies Act to further grant the same status to the respondent No. 3. 15. Amongst the issues raised before this Court, it is the specific plea taken by the petitioner that the respondent No. 3 was not established under the Central Act nor controlled by the Central Government but it is a corporation owned and funded by the Government of Meghalaya, which was duly registered by the Registrar of Companies on 12.7.1969, and it is not in dispute that the respondent No. 3 is having a certificate of corporation bearing No. 1332 of 1972 dated 6.4.1971. If the respondent No. 3 was in fact established under the State Financial Corporation Act, 1951, there was no necessity to confer to it powers under Sections 29, 30, 31, 32 and 32A to 32G thereof as was done vide Notification dated 06.04.1988. 16. Therefore, the arguments advanced by the learned counsel for the respondent No. 3 that the respondent No. 3 was registered under the Central Act become unacceptable because the registration was not done under the provisions of the State Financial Corporation Act, 1951. 17. 16. Therefore, the arguments advanced by the learned counsel for the respondent No. 3 that the respondent No. 3 was registered under the Central Act become unacceptable because the registration was not done under the provisions of the State Financial Corporation Act, 1951. 17. In view of above, it is found that the learned Debts Recovery Tribunal, Guwahati committed jurisdictional error in accepting the respondent No. 3 i.e. Meghalaya Industrial Corporation Ltd. to be a financial institution only on the basis of the notification dated 5.11.1976 issued under Sub-sections and Section 9 of the IDBI Act, 1964, as there is nothing contained in the said notification to confer the status of financial institution to the said corporation within the meaning of Section 4A of the Companies Act, 1956. 18. In view of above, as this Court has the superintending jurisdiction under Article 227 of the Constitution of India over the courts and tribunals functioning within the territorial jurisdiction of this Court, this court is of the view that this is a fit case to evoke the power conferred under Article 227 of the Constitution of India to set aside the impugned order dated 30.10.2013 passed by the learned Debts Recovery Tribunal, Guwahati by holding that the Meghalaya Industrial Development Corporation Ltd. (Respondent No. 3) is not a financial institution within the meaning of Section 4A of the Companies Act, 1956. 19. Consequently, the learned Debts Recovery Tribunal, Guwahati would have no jurisdiction to adjudicate the O.A. No. 211/2010. 20. Notwithstanding the above, as this Court finds that there are huge amount to be recovered by the respondent No. 3 from the petitioners No. 1 to 5 and others, the respondent No. 3 would be at liberty to continue to proceed against the petitioner No. 1 and others for recovery of their amount as provided under the applicable law and in that event, the respondent No. 3 would be entitled to the benefit of Section 14 of the Limitation Act, 1963 for exclusion of the period from the date of filing of O.A. No. 211/2010 till the expiry of 45(Forty Five) days from the date of this order. 21. This revision, therefore, stands allowed. Parties are left to bear their own cots.