The Bank Of Tokyo-Mitsubishi Ltd. vs M/S. Chembra Estates & Ors.
2001 Latest Caselaw 38 Bom

JUDGMENT

B.N. Srikrishna, J.

1. This Reference to a larger Bench has been made to resolve the conflict of opinion between two learned Single Judges of this Court in a matter arising under the Recovery of Debts Due to Banks and Financial Institutions Act. 1993. The facts pertaining to the Chamber Summons are not very material for the determination of the controversy before us. However, in order to understand the controversy, we have formulated the following issues, on'which there appears to be conflict, and which need resolution:-

"(a) Whether this Court would continue to have jurisdiction to Issue directions to the Court Receiver, High Court, Bombay, after the coming into force of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, even in cases where the Court Receiver, High Court, was appointed as Receiver in Suits failing within the purview of Section 17 of the Recovery of Debts Due to Banks and Financial Institutions Act. 1993?

(b) Whether, in such matters. Court Receiver, High Court. Bombay would continue to act as Court Receiver and. if so, from whom should the Court Receiver seek directions with regard to the discharge of his/her duties?

(c) Necessary consequential directions with regard to how the Court Receiver, High Court, Bombay should proceed?"

2. Broadly indicated, the facts of the Chamber Summons are as under:-By an order made by this Court in Suit No. 954 of 1997, the Court Receiver, High Court was appointed as Receiver In respect of a tea estate situated in Wynad, Kerala, sometime in the year 1987. Sometime in the year 1990, M/s. T. P. Murlidharan and Associates, a partnership firm, was appointed as agent of the Court Receiver, High Court, under an agreement of agency. On 19th October, 1992, the agency agreement was terminated by the Court Receiver on the ground of persistent breaches. On the report of the Court Receiver, this Court made an order on 30th April, 1993 appointing M/s. Travancore Malabar Estate as agent of the Court Receiver. M/s. T. P. Murlidharan and Associates, however, continued to act as Court

Receiver's agent during the period between 19th October, 1992 to 30th April. 1993. The Recovery of Debts Due to Banks and Financial Institutions Act. 1993 (hereinafter referred to as "R.D.B. Act. 1993") was brought Into force with effect from 24th June. 1993. By virtue of Section 18 of the R.D.B. Act. 1993, on and from the appointed day. the jurisdiction of all other Courts and authorities in relation to matters specified in Section 17 of the R.D.B. Act, 19931s barred. Section 17 invests exclusive jurisdiction in the Debts Recovery Tribunal under the R.D.B. Act, 1993 to entertain and decide applications from Banks and Financial Institutions for recovery of "debts" due to the Banks and Financial Institutions, expression "debt" being defined in Section 2(g) of the R.D.B. Act. 1993. Section 31 of the R.D.B. Act, 1993 also provides that all cases pending before any Court immediately before the coming into force of the R.D.B. Act. 1993, whether a Suit or other proceeding, the cause of action whereon it is based is such that it would have to be exclusively tried by the Tribunal under the R.D.B. Act. 1993, shall stand transferred on the appointed date to such Tribunal. The only exception made is in the case of Appeals pending before the Court. As a consequence of the coming Into force of the R.D.B. Act, 1993. the Suit was transferred to the Debts Recovery Tribunal and on 19th July, 2000 the Debts Recovery Tribunal decreed the claim in the Suit. It also directed sale of the concerned tea estate of which Receiver had been appointed. On 13th September. 2000. Chamber Summons No. 1047 of 2000 was moved before this Court for a direction to be issued to the Court Receiver, High Court. to expedite the sale of the suit tea estate on or before 20th October, 2000. By an order made on 20th October, 2000, a learned Single Judge of this Court [R. J. Kochar, J.) made the Chamber Summons absolute with no order as to costs. Pursuant thereto, the Recovery Officer attached to the Debts Recovery Tribunal is said to have sold the suit tea estate and recovered amounts in partial satisfaction of the decree.

3. Chamber Summons No. 1221 of 2000 was moved by one G. Sukumari, wife of T. P. Murltdharan, for slaying the sale and appointing her as Court Receiver's agent. This Chamber Summons was dismissed by the order of the learned Single Judge (R. J. Kochar, J.) dated 20th October. 2000.

4. By another Chamber Summons No. 1202 of 2000. the Plaintiff in the Suit prayed that the Defendants be ordered and directed to act as agent of the Court Receiver in respect of the tea estate and sought certain directions against the Court Receiver. The learned Single Judge (R. J. Kochar, J.) made the Chamber Summons absolute in terms of prayers (a), (b) and (c) and clarified that the agency agreement between the Court Receiver and the Defendants in the Suit would operate for a period of three months and after that till the sale of the tea estate by the Court Receiver. It was provided that the Defendants were at liberty to bid in the auction sale of the tea estate and purchase the same in accordance with the terms and conditions stipulated by the Court Receiver for sale of the property if they were successful in the bid. This Chamber Summons was also disposed of by the same order of the learned Single Judge dated 20th October, 2000.

5. Though the learned Judge disposed of the three Chamber Summons, he raised an issue as to whether on and from the appointed date the Tribunal under the R.D.B. Act, 1993 had exclusive jurisdiction with regard to the pending proceedings and whether this Court could at all give

directions to the Court Receiver, even though the Court Receiver might have been appointed much before the appointed date. On this issue, the learned Single Judge (R. J. Kochar, J.) referred to the judgment of the another learned Single Judge (S. H. Kapadia, J.) in l.C.l.C.I. Ltd. v. Patheja Brothers Forgtngs & Stampings Ltd. & Ors.,' and expressed his disagreement with the view taken by Kapadia, J. It is this disagreement which has led to the present Reference.

6. Kapadia, J.. in l.C.l.C.I. (supra) had framed the following questions for consideration :-

(1) Whether this Court has jurisdiction to Issue directions to the Court Receiver in Suits in which the Court Receiver stands appointed prior to 16th July, 1999?

(ii) If not, whether this Court Is empowered to give directions to Its Court Receiver regarding the properties which are in the custody of the said Receiver till such time as the D.R.T./Central Government sets up alternate office machinery with a proper infrastructure?

After analysing the provisions of the R.D.B. Act, 1993, the learned Judge (Kapadia. J.) held on the first issue that from the appointed date all proceedings, including proceedings in execution shall stand transferred to the Debts Recovery Tribunal; that the R.D.B. Act, 1993 is a complete Code in itself: that proceedings in which the Court Receiver had been appointed prior to the appointed date could not be said to have worked out as they continued to remain pending; that even such proceedings stand transferred to the Debts Recovery Tribunal; after the suit properties had become custodia legis under the orders passed before the appointed date, the management of such properties would be an on-going continuous process and their monitoring/management would require appropriate directions to be given to the Debts Recovery Tribunal. Although the learned Single Judge (Kapadia, J.) answered the first point affirmatively, with regard to the second point, the learned Judge was of the view that, even after coming into force of the R.D.B. Act, 1993. the right to possession of funds/properties held by the Court Receiver would remain undecided and until the Debts Recovery Tribunal appoints its Receiver under the R.D.B. Act. 1993. this Court could certainly issue directions to the Court Receiver on the reports of the Court Receiver regarding management and protection of the assets which are custodia legis. Consequently, the learned Judge (Kapadia. J.) directed that in all pending matters the Court Receiver should obtain directions with regard to fixation and recovery of royalties, fixation of sale price, implementation of agency agreements already executed and so on, from this Court. The learned Judge took this view on the ground that the Court Receiver was required to manage properties of very large value and the Debts Recovery Tribunal as yet had no machinery which could effectively manage and monitor such large properties the value of which was about Rupees Two thousand crores.

7. The Judgment of Kapadia, J.. in l.C.l.C.I. (supra) was the subject matter of another Reference which wae- decided by the Division Bench (B. N. Srikrlshna and Smt. Ranjana Desai, JJ.) dated 15th September, 2000. The Division Bench by this judgment upheld the view of S. H. Kapadia, J.,

that after the coming into the force of R.D.B. Act. 1993. al! proceedings, whether by way of Suit, Misc. proceedings or Execution proceedings stood transferred to the Debts Recovery Tribunal. The second issue decided by S. S. Kapadia, J. in his judgment dated 3rd March, 2000 was not the subject matter of the Reference and, therefore, the Division Bench expressed no view on the said issue.

8. Kochar. J. in his order dated 20th October, 2000 disagreed with the view expressed by Kapadia. J. on the second issue framed and answered by him in his judgment dated 3rd March. 2000 in I.C.I.C.I. (supra). Kochar. J. was of the view thai, there was no scope for directions being glv^n by this Court after all proceedings stood transferred to the Debts Recovery Tribunal as a result of coming into force of the R.D.B. Act. 1993. That is how the controversy has arisen before us.

9. The task before us has been considerably lightened because of two judgments of the Supreme Court. One is the judgment in Allahabad Bank v. Canara Bank & Anr.,'. The other judgment in Ham Parbati Cold Storage Put. Ltd, & Anr. v. UCO Bank & Ors..2 reiterates the earlier view. In the judgment in Allahabad Bank (supra), the Supreme Court considered the issue as to whether the Debts Recovery Tribunal constituted under the R.D.B. Act, 1993 has exclusive jurisdiction, with regard to adjudication and execution of claims found due. In paragraphs 21 and 22 of the said judgment, the Supreme Court observed as under :-

"21. In our opinion, the jurisdiction of the Tribunal in regard to adjudication is exclusive. The R.D.B. Act requires the Tribunal alone to decide applications for recovery of debts due to Banks or Financial Institutions. Once the Tribunal passes an order that the debt is due. the Tribunal has to issue a certificate under Section 19(22) (formerly under Section 19(7)) to the Recovery Officer for recovery of the debt specified in the certificate. The question arises as to the meaning of the word "recovery" in Section 17 of the Act. It appears to us that basically the Tribunal is to adjudicate the liability of the Defendant and then it has to issue a certificate under Section 19(22). Under Section 18, the jurisdiction of any other Court or authority which would otherwise have had jurisdiction but for the provisions of the Act, is ousted and the power to adjudicate upon the liability Is exclusively vested in the Tribunal. (This exclusion does not however apply to the jurisdiction of the Supreme Court or of a High Court exercising power under Articles 226 or 227 of the Constitution). This is the effect of Sections 17 and 18 of the Act.

22. We hold that the provisions of Sections 17 and 18 of the R.D.B. Act are exclusive so far as the question of adjudication of the liability of the Defendant to the Appellant Bank is concerned."

Again, with regard to the Tribunals's jurisdiction in execution, the Supreme Court says (vide paragraphs 23 and 24) as under :-

"23. ..... The provisions of Section 34(1) clearly state that the R.D.B. Act overrides other laws to the extent of "inconsistency". In our opinion, the prescription of an exclusive Tribunal both for adjudication and execution is a procedure clearly inconsistent with realisation of these debts in any other manner.

24. There Is one more reason as to why it must be held that the Jurisdiction of the Recovery Officer is exclusive. The Tiwari Committee which recommended the constitution of a Special Tribunal In 1981 for recovery of debts due to Banks and Financial Institutions stated in its Report that the exclusive jurisdiction of the Tribunal must relate not only in regard to the. adjudication of the liability but also in regard to the execution proceedings- It stated in Annexure XI of its Report that all "executive proceedings' must be taken up only by the Special Tribunal under the Act. In our opinion, in view of the special procedure for recovery prescribed In Chapter V of the Act, and Section 34. execution of the certificate is also within the exclusive jurisdiction of the Recovery Officer."

This view was reiterated In Ham Parbati (supra).

10. Way back in 1962, in Hiralal Patnt v. Loonkaran Sethtya and others,' the Supreme Court summarised the law with regard to appointment of Receiver as under :

"11. The law may briefly be stated thus : (1) If a Receiver is appointed in a Suit until Judgment, the appointment is brought to an end by the judgment in the action. (2) If a Receiver Is appointed in a Suit, without his tenure being expressly defined, he will continue to be Receiver till he is discharged. (3) But, after the final disposal of the Suit as between the parties to the litigation, the Receiver's functions are terminated, he would still be answerable to the Court .as its officer till he is finally discharged. (4) The Court has ample power to continue the Receiver even after the final decree if the exigencies of the case so require."

11. All Receivers appointed by this Court, either in pending Suits or in execution of decrees, unless their tenure was expressly defined, would continue to be Receivers till discharged by the Court. As a result of the coming into force of the R.D.B. Act. 1993 and the establishment of the Debts Recovery Tribunal with effect from 16th July. 1999, the jurisdiction of this Court as a Civil Court to entertain Suits or any other proceedings, including proceedings in execution, in cases falling within the purview of Section 17, ceased from that date by reason of Section 18 of the R.D.B. Act, 1993. Simultaneously. Section 31 of the R.D.B. Act, 1993 provides that all pending Suits and proceedings therein would stand transferred to the Debts Recovery Tribunal. Thus, all Suits or other proceedings pending before this Court immediately before 17th July. 1999 automatically stood transferred by operation of law to the Debts Recovery Tribunal. As pointed out in Allahabad Bank (supra), the transfer of the papers to the Debts Recovery Tribunal is a mere ministerial act. The only proceedings which do not stand transferred are proceedings in Appeal which are exempted by the proviso to sub-section (1) of Section 31 of the R.D.B. Act. 1993.

12. The next question that arises for our consideration Is what happens to the Receivers who are already appointed before the Suit or proceedings stood transferred to Debts Recovery Tribunal by operation of law. This question is easily answered in view of the judgment of the Supreme Court in Htralal Patnt (supra) that wherever a Receiver was appointed pending a Suit without his tenure being expressly defined, the Receiver would continue to act as a Receiver. Even with regard to execution proceedings, the Receiver would be subject to the directions of the Court. In our judgment,

since the jurisdiction of this Court qua Civil Court with regard to matters falling within the province of R.D.B. Act, 1993 has been taken away and vested in the Debts Recovery Tribunal, as from the cut off date the only forum which is competent to entertain Suits or other proceedings would be the Debts Recovery Tribunal. This would be so even with regard to matters which stood transferred by operation of Section 31 of the R.D.B. Act, 1993. The only Court which could thereafter competently give directions to the Receiver in the discharge of his/her duties would be the Debts Recovery Tribunal.

13. After carefully considering the judgments of the two learned Single Judges (Kapadla, J. and Kochar, J.) we are inclined to agree with the view taken by R. J. Kochar, J., namely, that after the coming into force of the R.D.B. Act, 1993. this Court would have no jurisdiction to give directions to the Receiver, whether appointed pending a Suit or in execution. In fact, even Kapadla. J. also took the same view, but recognising the practical difficulties that would arise on account of the Debts Recovery Tribunal not being equipped with a separate office of Court Receiver, and the exceedingly high value of the properties already put in custody of the Court Receiver of the High Court, the learned Judge (Kapadia, J.) was inclined to direct that the Court Receiver should take directions from this Court for a specified period. We are not inclined to say that this direction was erroneous In law for, apart from being Civil Court, this Court is also a Court of record. In exercise of the powers of this Court, both as Court of record and under Section 151 of the Civil Procedure Code, the learned Single Judge was justified in continuing the Receiver and directing her/him to obtain directions from this Court, ex-debito justitiae.

14. However, we are informed that till today no separate machinery of Court Receiver has been made available to the Debts Recovery Tribunal. For reasons of practical expediency expounded in the judgment of Kapadia, J. we too are inclined to think that the machinery of Court Receiver available with this Court should be made available to the Debts Recovery Tribunal for a period of one year from today. However, we are of the view that any further directions to be issued to the Court Receiver can only come from the Debts Recovery Tribunal or the Appellate Tribunal under the R.D.B. Act, 1993 and not from this Court on the Original Side.

15. Hence, we answer the Reference as under :-

(a) After the coming into effect of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 and the establishment of the Debts Recovery Tribunal with effect from 19th July. 1999, this Court ceased to have any jurisdiction to issue directions to the Court Receiver. High Court, Bombay appointed In Suits or other proceedings pending on the said date.

(b) In all such cases which were pending before this Court on the Original Side on 16th July, 1999 and stood transferred to the Debts Recovery Tribunal by reason of Section 31 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, the Court Receiver, High Court, already appointed would continue to act as Court Receiver, but subject to the directions to be issued by the Debts Recovery Tribunal/Appellate Tribunal.

(c) The Court Receiver, High Court. Bombay being an employee of the High Court is subject to administrative control of the learned Chief Justice.

We would recommend to the learned Chief Justice that the Court Receiver's services may be made available to the Debts Recovery Tribunal/Appellate Tribunal for a period of one year from mday. During the aforesaid period, it would be open to the Tribunal/Appellate Tribunal under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, suo motu, or at the instance of any party to the Suit or other proceedings, to discharge the Court Receiver of the High Court and appoint any other fit person as Receiver of the properties.

(d) The Court Receiver, High Court. Bombay, shall function as Court Receiver in respect of all matters transferred to the Debts Recovery Tribunal in which he/she has been appointed as Receiver and obtain directions from the Debts Recovery Tribunal or Appellate Tribunal with regard to her/his functioning. Such directions may be obtained either by a report made by the Court Receiver to the Debts Recovery Tribunal or the Appellate Tribunal or by applications moved by the parties before the Debts Recovery Tribunal or the Appellate Tribunal.

(e) The Court Receiver, High Court, Bombay shall be at liberty to apply for discharge from all or any of the proceedings now pending before the Debts Recovery Tribunal or the Appellate Tribunal under the Recovery of Debts Due to Banks and Financial Institutions Act. 1993, either at the expiry of one year from today or at any earlier point of time, if so directed by the Hon'ble the Chief Justice.

(f) The Debts Recovery Tribunal or the Appellate Tribunal has Jurisdiction to issue all appropriate directions to the Court Receiver. High Court, Bombay which were hitherto being given by this Court.

16. We answer the Reference accordingly.

17. Parties to act on an ordinary copy of this judgment duly authenticated by the Associate of this Court.

18. Issuance of certified copy expedited.