STATE BANK OF PATIALA Vs. MUKESH JAIN & ANR.

Tags Debt

Supreme Court of India (Division Bench (DB)- Two Judge)

Appeal (Civil), 210 of 2007, Judgment Date: Nov 08, 2016

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 210 OF 2007

STATE BANK OF PATIALA … APPELLANT

VERSUS

MUKESH JAIN & ANR. … RESPONDENTS

J U D G M E N T

ANIL R. DAVE, J.

1. Being aggrieved by the judgment dated 8th April, 2005 delivered in
Civil Revision Petition No.242 of 2004 by the High Court of Delhi, this
appeal has been filed by the appellant, whose application filed under Order
VII Rule 11 of the Code of Civil Procedure, 1908 had been rejected by the
trial Court and being aggrieved by the order of rejection dated 9th
February, 2004, the aforestated Civil Revision Petition was filed before
the High Court, but the said Civil Revision Petition was also rejected by
the impugned order and therefore, this appeal has been filed.

2. The facts giving rise to the present litigation, in a nutshell, are
as under:

The appellant is a nationalized bank which had lent Rs.8,00,000/-
(Rupees eight lakh) to respondent no.1 by way of a term loan on certain
conditions and so as to secure the said debt, respondent no.1 debtor had
mortgaged his immovable property forming part of premises bearing no.C-
8/298, Yamuna Vihar, Delhi. As respondent no.1 committed default in re-
payment of the said loan, the appellant initiated proceedings under the
provisions of the Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002 (hereinafter referred to as ‘the
Act’). When notice under Section 13(2) of the Act had been issued and
further proceedings were sought to be initiated by the appellant against
respondent no.1, the said proceedings had been challenged by respondent
no.1 by filing Civil Suit No.4 of 2003 in the Court of Civil Judge, Delhi.

3. In the said suit, the appellant filed an application under Order VII
Rule 11 of the CPC contending that the Court had no jurisdiction to
entertain the suit in view of the provisions of Section 34 read with
Section 13(2) of the Act, which prohibits a Civil Court from dealing with
the matters arising under the provisions of the Act. After considering the
averments made in the application as well as the reply given by respondent
no.1 and upon hearing the concerned counsel, the said application had been
rejected by the trial Court by an order dated 9th February, 2004.

4. Being aggrieved by the rejection of the said application, the
appellant filed Civil Revision Petition No.242 of 2004 in the High Court of
Delhi. The said petition was also rejected by the impugned judgment dated
8th April, 2005 and being aggrieved by the said judgment, the present
appeal has been filed by the appellant.

5. The reason for which the application filed under Order VII Rule 11 of
the CPC had been rejected by the trial Court was that the suit was
maintainable in view of the fact that the subject matter of the suit i.e.
the amount which was sought to be recovered by the appellant from
respondent no.1 (original plaintiff) was less than Rs.10,00,000/- (Rupees
Ten lakh) and according to the provisions of Section 1(4) of the Recovery
of Debts due to Banks and Financial Institutions Act, 1993 (hereinafter
referred to as ‘the DRT Act’), the provisions of the DRT Act would not
apply, where the amount of debt due to any bank or financial institution is
less than Rs.10 lakh and therefore, it was not open to the Debt Recovery
Tribunal (hereinafter referred to as “the Tribunal”) to entertain the
matter as the amount claimed in the suit was less than Rs.10 lakh.

6. In the aforestated circumstances, the trial Court was of the view
that as the DRT Act had no jurisdiction to entertain an appeal against the
order passed under the provisions of the Act, a civil suit was maintainable
and therefore, the application made under Order VII Rule 11 of the CPC had
been rejected by the trial Court. The High Court confirmed the said view
of the trial Court.

7. The learned counsel appearing for the appellant, challenging the
validity of the impugned judgment, submitted that the view expressed by the
High Court confirming rejection of the application under Order VII Rule 11
is not correct because the Civil Court has no jurisdiction to entertain any
proceedings under the Act as per the provisions of Section 34 of the Act.
Section 34 of the Act expressly bars the jurisdiction of the Civil Court
from dealing with any matter which arises under the Act.

8. The learned counsel submitted that the trial Court as well as the
High Court were not correct while coming to the conclusion that the
Tribunal had no jurisdiction to entertain an appeal against the order
passed under the Act in pursuance of the provisions of Section 1(4) of the
DRT Act.

9. He also submitted that the Act was enacted in 2002, whereas the DRT
Act was enacted in 1993. As the Act was enacted later in point of time,
provisions of Section 34 of the Act would prevail and therefore, no
proceedings of any type arising under the Act can be entertained by a Civil
Court. He, therefore, submitted that the application filed by the
appellant before the trial Court under Order VII Rule 11 should have been
granted by the trial Court.

10. So as to substantiate his submission, the learned counsel relied upon
a judgment delivered in the case of Mardia Chemicals Ltd. and others v.
Union of India and others 2004(4) SCC 311. For the aforestated reasons
he submitted that the appeal deserved to be allowed and the impugned
judgment should be set aside so that the Civil Court can be restrained from
proceeding further with the suit on the ground of lack of jurisdiction.

11. Though served, nobody appeared for the respondents.

12. We have heard the learned counsel at length and also considered the
relevant provisions of law referred to and the judgment cited by him.

13. The issue involved in the appeal is whether, in the instant case, the
suit was maintainable against the proceedings initiated under the
provisions of the Act. The application filed by the appellant under Order
VII Rule 11 of the CPC was rejected mainly for the reason that the Tribunal
had no jurisdiction to entertain the proceedings under the provisions of
Section 1(4) of the DRT Act as the value of the suit was less than Rs.10
lakh and therefore, the Civil Suit was the only remedy available to the
respondents (original plaintiffs).

14. It would be beneficial to consider the relevant provisions of the Act
referred to hereinabove:

“17. Right to appeal (1) Any person (including borrower), aggrieved by any
of the measures referred to in sub-section (4) of Section 13 taken by the
secured creditor or his authorized officer under this Chapter, [may make an
application along with such fee, as may be prescribed] to the Debts
Recovery Tribunal having jurisdiction in the matter within forty-five days
from the date on which such measures had been taken:

Provided that different fees may be prescribed for making the application
by the borrower and the person other than the borrower.

………………………………………..”

x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x

“34. Civil Court not to have jurisdiction.- No civil Court shall have
jurisdiction to entertain 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 and no injunction shall be granted 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 (51 of 1993).”

Section 1(4) of the DRT Act reads as under:

“1. Short title, extent, commencement and application. -

(1) ……………..

(2) ……………..

(3) ……………..

(4) The provisions of this Act shall not apply where the amount of debt
due to any bank or financial institution or to a consortium of banks or
financial institutions is less than ten lakh rupees or such other amount,
being not less than one lakh rupees, as the Central Government may, by
notification, specify.”

15. Upon perusal of Section 34 of the Act, it is very clear that no Civil
Court is having jurisdiction to entertain any suit or proceeding in respect
of any matter which a Debt Recovery Tribunal or the appellate Tribunal is
empowered by or under the Act to determine the dispute. Further, the Civil
Court has no right to issue any injunction in pursuance of any action taken
under the Act or under the provisions of the DRT Act.

16. In view of a specific bar, no Civil Court can entertain any suit
wherein the proceedings initiated under Section 13 of the Act are
challenged. The Act had been enacted in 2002, whereas the DRT Act had
been enacted in 1993. The legislature is presumed to be aware of the fact
that the Tribunal constituted under the DRT Act would not have any
jurisdiction to entertain any matter, wherein the subject matter of the
suit is less than Rs.10 lakh.

17. In the aforestated circumstances, one will have to make an effort to
harmonize both the statutory provisions. According to Section 17 of the
Act, any person who is aggrieved by any of the actions taken under Section
13 of the Act can approach the Tribunal under the provisions of the DRT
Act.

18. In normal circumstances, there cannot be any action of any authority
which cannot be challenged before a Civil Court unless there is a statutory
bar with regard to challenging such an action. Section 34 specifically
provides the bar of jurisdiction and therefore, the order passed under
Section 13 of the Act could not have been challenged by respondent no.1
debtor before any Civil Court.

19. In the aforestated circumstances, the only remedy available to
respondent no.1 debtor can be to approach the Tribunal under the provisions
of the DRT Act read with the provisions of the Act. But, one would feel
that as per Section 1(4) of the DRT Act, provisions of the DRT Act would
not apply where the amount of debt is less than Rs.10 lakh.

20. The aforestated provision of Section 1(4) of the DRT Act must be read
in a manner which would not adversely affect a debtor, who wants to have
some remedy against an action initiated under the provisions of Section 13
of the Act.

21. The DRT Act mainly pertains to institution of proceedings by a bank
for recovery of its debt when the debt is not less than Rs.10 lakh. If the
debt is less than Rs.10 lakh, no suit can be filed by the creditor bank in
the Tribunal under the provisions of the DRT Act. So, when the
jurisdiction of the Tribunal has been referred to in Section 1(4) of the
DRT Act, which limits the jurisdiction of the Tribunal to Rs.10 lakh, prima
facie, the intention of the legislature is to limit the original
jurisdiction of the Tribunal. If any claim is to be made before the
Tribunal, the amount must be more than Rs.10 lakh and if the amount is less
than Rs.10 lakh, the creditor bank will have to file a suit in a Civil
Court. So, one can safely interpret the provisions of Section 1(4) of the
DRT Act to the effect that it deals with original jurisdiction of the
Tribunal under the provisions of the DRT Act.

22. In the instant case, we are concerned with the challenge to the
proceedings initiated under Section 13 of the Act. There is a specific
provision in the Act to the effect that the proceedings initiated under the
Act cannot be challenged before a Civil Court because the Civil Court has
no jurisdiction to entertain any matter arising under the Act and in that
event, the concerned debtor has to approach the Tribunal under the
provisions of Section 17 of the Act.

23. Thus, the Tribunal would be exercising its appellate jurisdiction
when the action initiated under the provisions of Section 13 of the Act is
challenged before the Tribunal. There is a difference between the
Tribunal’s original jurisdiction under the provisions of the DRT Act and
the appellate jurisdiction under the Act.

24. The issue with regard to availability of a forum for challenging the
action under the provisions of the Act had been dealt with by this Court in
the case of Mardia Chemicals Ltd. (supra). This Court, in the said case,
unequivocally held that the aggrieved debtor can never be without any
remedy and we firmly believe that the legislature would normally not leave
a person without any remedy when a harsh action against him is initiated
under the provisions of the Act.

25. So as to know the appellate jurisdiction of the Tribunal, one has to
look at the provisions of the Act as Section 17 of the Act specifically
provides a right to the aggrieved debtor to challenge the validity of an
action initiated under Section 13(4) of the Act before the Tribunal.
Moreover, the Act was enacted in 2002 and the legislature is presumed to
have knowledge about the provisions of Section 1(4) of the DRT Act. So
harmonious reading of both the aforestated Sections would not be contrary
to any of the legal provisions.

26. For the aforestated reasons, we are of the view that the application
submitted by the appellant bank under Order VII Rule 11 of the CPC should
have been granted by the trial Court as, according to Section 34 of the
Act, a Civil Court has no jurisdiction to entertain any appeal arising
under the Act.

27. Thus, we hold that the Debt Recovery Tribunal constituted under the
DRT Act has jurisdiction to entertain an appeal as per Section 17 of the
Act even if the amount involved is less than Rs.10 lakh. But, the said
appellate jurisdiction need not be misunderstood with the original
jurisdiction of the Tribunal.

28. For the aforestated reasons, the impugned judgment as well as the
order rejecting the application filed under Order VII Rule 11 are set
aside. The appeal is allowed with no order as to costs.

.…………………………….J.
(ANIL R. DAVE)

……………………………..J.
(L. NAGESWARA RAO)
NEW DELHI
NOVEMBER 8, 2016.

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