Bombay High Court
Dr. Sudhakar S/O Bajirao Borkar vs State Bank Of India, Hingna ... on 14 June, 2017
Bench: V.A. Naik
1406WP3452.15-Judgment 1/17
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
NAGPUR BENCH, NAGPUR.
WRIT PETITION NO. 3452 OF 2015
PETITIONER :- Dr. Sudhakar s/o. Bajirao Borkar, aged about
68 years, Occupation-Medical Practitioner,
R/o. 56, Banerji Layout, Bhagwan Nagar,
Nagpur.
...VERSUS...
RESPONDENTS :- 1. The State Bank of India, Hingna Industrial
Branch, Hingna, M.I.D.C. Area, Nagpur,
through it's Branch Manager.
2. The Recovery Officer, Debt Recovery
Tribunal, B-Block, C.G.O. Complex,
Seminary Hills, Nagpur-440 006.
3. The Presiding Officer, Debt Recovery
Tribunal, C.G.O. Complex, Seminary Hills,
Nagpur - 440 006.
4. The Chairperson Debt Recovery Appellate
Tribunal, Scindia House, 6th Floor, Ballard
Estate Mumbai-400 001.
5. M/s. R & S, Enterprises, D-58, M.I.D.C.
Area, Hingna Industrial Estate, Nagpur,
Nagpur, Through : Proprietor, Shriram
Nagnath Joshi, Aged 62 years, Presently
R/o. Vidarbha Housing Society, Jatharpeth,
Near S.T.Stand, Akola, Dist. Akola.
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Mr. A.M.Ghare, counsel for the petitioner.
Mr. Atul Pande, counsel for the respondent No.1.
Mrs. Anjali Joshi, counsel for the respondent Nos.2, 3 and 4.
None for the respondent No.5.
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CORAM : SMT. VASANTI A NAIK &
ARUN D. UPADHYE
, JJ.
DATED : 14.06.2017
1406WP3452.15-Judgment 2/17
O R A L J U D G M E N T (Per Smt. Vasanti A Naik, J.)
Whether it would be necessary for the Debts Recovery
Tribunal to serve a notice of the proceedings filed by the decree holder
under section 31-A of the Recovery of Debts Due to Banks and Financial
Institutions Act, 1993 (hereinafter referred to as the 'Act' for the sake of
brevity) on the judgment debtors-defendants is the question that falls
for consideration in this writ petition.
2. Rule. Rule made returnable forthwith. The writ petition
is heard finally, with the consent of the learned counsel for the parties.
3. The petitioner was a guarantor to the loan transaction
between the respondent No.1-State Bank of India and the borrower-the
respondent No.5 to the writ petition. The respondent No.5 defaulted in
repaying the debt. The State Bank of India filed Special Civil Suit
No.639 of 1991 for recovery of an amount of Rs.10,51,759/- against the
respondent No.5-borrower and the petitioner-guarantor. The said suit
was decreed ex parte against the petitioner and the respondent No.5.
Execution proceedings were filed by the State Bank of India for
executing the decree for a sum of Rs.14,39,025/-. An amount of
Rs.9,40,000/- was recovered by the State Bank of India by selling the
mortgaged property of the borrower. After section 31-A was inserted in
1406WP3452.15-Judgment 3/17
the Act by the Amendment Act, 2000 permitting a decree holder to seek
the recovery certificate in terms of the decree, the State Bank of India
filed an application under section 31-A of the Act before the Debts
Recovery Tribunal on 27/11/2002. The Debts Recovery Tribunal issued
a notice to the petitioner and the respondent No.5 but the notice was
received back with the endorsement "left". After the notice was
returned back, the Debts Recovery Tribunal proceeded to consider the
application filed by the State Bank of India under section 31-A of the
Act without service of notice on the petitioner after observing that it
would not be necessary to serve a notice on the petitioner and the
respondent No.5 in the proceedings for grant of recovery certificate
under section 31-A of the Act. By the impugned order dated
13/05/2003 the Debts Recovery Tribunal issued a recovery certificate in
the sum of Rs.10,51,759/- against the petitioner and the respondent
No.5 with future interest at the rate of 15% per annum. Being
aggrieved by the order of the Debts Recovery Tribunal, the petitioner
filed an appeal before the Debts Recovery Appellate Tribunal. The
Debts Recovery Appellate Tribunal dismissed the appeal filed by the
petitioner by the order dated 28/11/2014. Both the orders are
impugned by the petitioner in the instant petition.
4. Shri Ghare, the learned counsel for the petitioner,
submitted that the impugned orders are liable to be quashed and set
1406WP3452.15-Judgment 4/17
aside, as the Debts Recovery Tribunal has issued a recovery certificate
against the petitioner without serving a notice of the proceedings on
him. It is submitted by taking this court through the provisions of rules
9, 11 and 12 of the Debts Recovery Tribunal (Procedure) Rules, 1993
that it would be necessary to serve a notice of the proceedings filed by
the decree holder under section 31-A of the Act on the judgment debtor
against whom a recovery certificate is sought. It is submitted that on a
combined reading of the provisions of rules 9, 11 and 12 of the Rules of
1993, it is clear that a copy of the application under section 31-A of the
Act is required to be served on each of the defendants to the
proceedings. It is submitted that only after the defendant/defendants
is/are served, the tribunal is empowered to decide the application for
issuance of recovery certificate. It is submitted by referring to the Debts
Recovery Tribunal (Maharashtra and Goa) Regulations of Practice and
specially regulation 39 thereof that an application under section 31-A is
required to be made in Form No.29 and it is necessary for the tribunal
to issue a show cause notice of the said application to the certificate
debtor. It is stated that regulation 39(3) of the Regulations provides
that the presiding officer of the tribunal, is entitled to pass an
appropriate order after considering the reply filed by the certificate
debtor. It is submitted that it is apparent from a reading of the
provisions of the Rules of 1993 and the Debts Recovery Tribunal
(Maharashtra and Goa) Regulations of Practice that it would be
1406WP3452.15-Judgment 5/17
incumbent for the tribunal to ensure that a notice of the proceedings
under section 31-A of the Act is served on the defendants before the
tribunal decides the application for issuance of recovery certificate. It is
submitted that in the present case, though the tribunal had issued the
notice to the respondent No.5 and the petitioner and the notice was
returned back with an endorsement "left", the tribunal proceeded to
decide the application under section 31-A of the Act in the absence of
service of notice on the petitioner and the respondent No.5 after
holding that it is not necessary to serve a copy of the application under
section 31-A of the Act on the defendants before issuance of a recovery
certificate.
5. Shri Pande, the learned counsel for the State Bank of
India, has supported the impugned orders. It is submitted that a decree
is passed in favour of the State Bank of India by the civil court and there
is no question of adjudication as to what amount is due and recoverable
by the bank from the petitioner or the respondent No.5. It is submitted
that since the decree was not fully executed through the civil court and
the provisions of section 31-A of the Act were inserted in the Act, the
application under section 31-A of the Act was filed. It is submitted that
section 31-A of the Act does not speak of the service of notice on the
party against which a recovery certificate is sought, in the proceedings
under section 31-A of the Act. It is stated by referring to rules 9 and 12
1406WP3452.15-Judgment 6/17
of the Rules of 1993, specially sub-rules (5) and (6) of Rule 12 that
since the liability is not fixed on the debtor or guarantor when an
application under section 19 of the Act is filed, the provisions of sub-
rules (5) and (6) of rule 12 authorise the tribunal to pass an order
against the defendant to pay the amount to the extent of the admission
and further empower the tribunal to order that any particular fact or
facts shall be proved by affidavit or by the production of witnesses. It is
submitted that it is apparent from a reading of sub-rules (5) and (6) of
Rule 12 that rule 12 would not apply to an application under section
31-A of the Act and would govern only an application under section 19.
It is submitted that it appears from the provisions of rules 9 and 12 of
the Rules that the provisions made therein would be applicable only to
an application made under section 19 of the Act and not under section
31-A of the same. It is submitted that in this case, the application was
filed by the State Bank of India on 27/11/2002 and rule 9, so far as it
relates to the filing of the application under sections 19 and 31-A, was
inserted on 21/01/2003. It is submitted that the Debts Recovery
Tribunal (Maharashtra and Goa) Regulations of Practice have been
brought into effect in March, 2003 and even if the regulations provide
for the service of the notice on the defendants, the said regulations
would not apply to the application filed by the State Bank of India, on
27/11/2002. It is submitted that the Debts Recovery Tribunal was
satisfied that the amount for which the recovery certificate was issued
1406WP3452.15-Judgment 7/17
against the petitioner and the respondent No.5 was due and payable by
them and after recording the satisfaction, the impugned order was
passed. The learned counsel relied on the judgment, reported in 2000
(4) Mh.L.J. 657 (Bank of India v. Shree Satya Corpn.) and specially
paragraph 18 thereof to substantiate his submission that the scope of
the applications under section 19 and section 31-A of the Act is
altogether different. It is submitted that paragraph 18 of the judgment
would be a clue for deciding whether it would be necessary to serve the
notice of the proceedings under section 31-A of the Act for issuance of a
recovery certificate. It is submitted that since the tribunal is not
empowered to sit in appeal over the decree passed by the civil court and
nothing remains to be adjudicated in regard to the liability of the
borrower or the guarantor, the service of notice is not necessary.
6. For answering the question involved in this writ petition, it
would be necessary to consider a few provisions of the Act and the
Rules. At the outset, it would be necessary to refer to the provisions of
section 31-A of the Act under which the application for issuance of
certificate of recovery is filed. Section 31-A of the Act reads thus :-
31-A. Power of Tribunal to issue certificate of recovery in
case of decree or order. - (1) Where a decree or order was
passed by any Court before the commencement of the Recovery
of Debts to Banks and Financial Institutions (Amendment) Act,
2000 and has not yet been executed, then, the decree-holder
1406WP3452.15-Judgment 8/17
may apply to the Tribunal to pass an order for recovery of the
amount.
(2) On receipt of an application under sub-section
(1), the Tribunal may issue a certificate for recovery to a
Recovery Officer.
(3) On receipt of a certificate under sub-section (2),
the Recovery Officer shall proceed to recover the amount as if it
was a certificate in respect of a debt recoverable under this Act.
It is apparent from a reading of section 31-A of the Act
that the tribunal is empowered to issue a certificate of recovery in case
of a decree or order. A decree holder who was unable to get the decree
executed before the coming into force of the Amendment Act, 2000 is
entitled to apply to the tribunal for an order for recovery of the
amount. Sub-section (2) of section 31-A of the Act provides that the
tribunal may issue a certificate for recovery of amount to a Recovery
Officer. Sub-section (2) of the Act gives a discretion to the tribunal to
either issue or not to issue a recovery certificate. We are not concerned
with sub-section (3) of section 31-A of the Act while dealing with the
question that we are required to answer. After section 31-A of the Act
was brought on the statute book on 17/01/2000, the Debts Recovery
Tribunal (Procedure) Rules, 1993 were accordingly amended. On
21/01/2003, rule 9 of the Rules of 1993 was amended. The
unamended provisions of rule 9, provided for the procedure for filing of
every application before the Debts Recovery Tribunal. The words "every
1406WP3452.15-Judgment 9/17
application" were substituted by the words "an application under
section 9 or section 31-A". It would be necessary to consider the
provisions of rules 9, 11 and 12 of the Rules at this stage. The relevant
rules are reproduced here for reference :-
9. Documents to accompany the application under section
19 or section 31-A of the Act. - (1) An application under
section 19 or section 31-A shall be accompanied by a paper
book containing :-
(i) a statement showing details of the debt due from
a defendant and circumstances under which such debt has
become due; and shall also disclose details of the case and
decision in that case which is sought to be reviewed;
(ii) all documents relied upon by the applicant and
those mentioned in the application;
(iii) details of the crossed demand draft or crossed
Indian Postal Order representing the application fee;
(iv) Index of Documents.
(2) The documents referred to in sub-rule (1) shall be
neatly typed in double space on one side of the paper, duly
attested by a senior officer of the Bank, or Financial Institution,
as the case may be, and numbered accordingly.
(3) Where the parties to the suit or proceedings are
being represented by an agent, document's authorising him to
act as such agent shall be appended to the application:
Provided that where an application is filed by a legal
practitioner, it shall be accompanied by a duly executed
vakalatnama.
1406WP3452.15-Judgment 10/17
11. Endorsing copy of application to the defendant. - A
copy of the application and paper-book shall be served on each
of the defendants as soon as they are filed, by the Registrar by
registered post.
12. Filing of written statement and other documents by
the defendant and by the applicant as a reply to the
written statement. - (1) The defendant may, within a period
of thirty days from the date of service of summons, file two
complete sets of written statement including claim for set-off or
counter claim, if any, along with documents in a paper book
form.
(2) A copy of the written statement filed under sub-
rule (1) shall be served to the applicant.
(3) If the defendant fails to file the written statement
of his defence, including claim for set-off or counter claim under
sub-rule (1), if any, within the period of thirty days, the
Presiding Officer may in exceptional cases and special
circumstances to be recorded in writing, extend the period, by
such further period not exceeding fifteen days.
(4) If the defendant have filed their claim for set-off
or counter claim, the applicant shall file reply statement in
answer to the claim for set-off or counter claim within a period
of thirty days of filing of such claims.
(5) If the applicant fails to file his reply within the
period of thirty days, the Presiding Officer may, in exceptional
cases and special circumstances, to be recorded in writing,
extend the period, by such further period not exceeding fifteen
days.
1406WP3452.15-Judgment 11/17
(6) The written statement of the defendant including
claim for set-off or counter claim or any other pleading
whatsoever by the defendant or the applicant, as the case may
be shall be supported by an affidavit sworn in by the defendant
or the applicant or the witnesses, verifying all the facts and
pleadings and other documents annexed and the affidavits of
witnesses, to be led by defendant or the applicant shall be filed
simultaneously with the written statement of the defendant or
the reply of the applicant.
(7) If the defendant or the applicant as the case may
be, fails to file the reply as specified above, the Tribunal may
proceed forthwith to pass an order on the application as it
thinks fit.
(8) Where a defendant makes an admission of the full
or part of the amount of debt due to a bank or financial
institution, the Tribunal shall order such defendant, to pay such
amount, to the extent of the admission, by the applicant within
a period of thirty days from the date of such order, failing
which the Tribunal may issue a certificate in accordance with
section 19 of the Act, to the extent of amount of debt due
admitted by the defendant.
(9) The Tribunal may at any time for sufficient
reason order that any particular fact or facts shall be proved by
affidavit, or that the affidavit of any witness shall be read at the
hearing, on such conditions as the Tribunal thinks reasonable:
Provided that after filing of the affidavits by the
respective parties where it appears to the Tribunal that either
the applicant or the defendant desires the production of a
witness for cross examination and that such witness can be
produced and it is necessary to do so, the Tribunal shall for
1406WP3452.15-Judgment 12/17
sufficient reasons to be recorded, order the witness to be present
for cross examination, and in the event of the witness not
appearing for cross examination, then, the affidavit shall not be
taken into evidence and further that no oral evidence other than
that given in this proviso will be permitted.
(10) If the defendant denies his liability to pay the
claim made by the applicant, the Tribunal may act upon the
affidavit of the applicant who is acquainted with the facts of the
case or who has on verification of the record sworn the affidavit
in respect of the contents of application and the documents as
evidence.
(11) The provisions contained in section 4 of the
Banker's Books Evidence Act, 1891 (18 of 1891) shall apply to
a certified copy of an entry in a banker's book furnished along
with the application filed under sub-section (1) of section 19 by
the applicant.
Though none of the parties have referred to rule 13 of the
Rules of 1993, in our view the said rule would also be relevant. Rule 13
of the Rules reads thus :-
13. Date and place of hearing to be notified. - The
Tribunal shall notify the parties the date and place of hearing of
the application in such a manner as the Presiding Officer may
by general or special order direct.
7. On a reading of rule 9 of the Rules, it is clear that the said
rule provides for the manner in which an application under section 19
or section 31-A of the Act is required to be filed. Rule 11 of the Rules
1406WP3452.15-Judgment 13/17
would be more relevant. The said rule provides that a copy of the
application and the paper book shall be served on each of the
defendants, by the registrar as soon as they are filed, by registered post.
On a reading of rule 11, it is clear that a duty is enjoined upon the
registrar of the Debts Recovery Tribunal to serve a copy of the
application under section 19 or section 31-A of the Act on each of the
defendants as soon as it is filed. Rule 12 of the Rules provides that the
defendant would be required to file two complete sets containing the
reply to the application along with documents with the Registry within
one month of the service of the notice of the application on him. The
defendant is further required to endorse one copy of the reply along
with documents as mentioned herein above, to the applicant who files
the application under section 19 or section 31-A of the Act, as the case
may be. The tribunal is empowered to permit a defendant to file a reply
after the expiry of the period of one month in its discretion. In terms of
sub-rule (4) of Rule 12, if the defendant fails to file the reply on or
before the fixed date, the tribunal is empowered to proceed forthwith to
pass an order on the application, as it may deem fit. Sub-rules (1), (2),
(3) and (4) would surely apply to the applications under either section
19 or section 31-A of the Act. Sub-rule (5) of rule 12 on which great
reliance has been placed by the learned counsel for the State Bank of
India may not apply to an application under section 31-A of the Act, but
would apply to an application made under section 19. In a given case,
1406WP3452.15-Judgment 14/17
sub-rule (6) of rule 12 could be applied to an application under section
31-A of the Act also. On a reading of the provisions of rules 9, 11 and
12, it is clear that it would be incumbent upon the registrar of the Debts
Recovery Tribunal to ensure that the application under section 31-A of
the Act is served on each of the defendants. Rule 13 of the Rules would
also be relevant. This rule provides that the tribunal would notify the
date and place of hearing of the application to the parties in such
manner, as the presiding officer may by general or special order direct.
This rule would apply to the parties to an application under section 19
or section 31-A of the Act. The rule provides for an opportunity of
hearing to the parties before an application is decided by an order that
is required to be signed as per the provisions of rule 14 of the Rules of
1993. Though the provisions of the Rules of 1993 clearly provide for
the service of notice of an application made by a financial institution
under section 31-A of the Act on the defendants, the Debts Recovery
Tribunal (Maharashtra and Goa) Regulations of Practice, 2003 further
endorse that the service of notice of the application on the defendants
would be necessary. Regulation 39 of the Regulations of Practice, 2003
provides for the filing of an application for issuance of recovery
certificate in Form No.29 and casts a duty upon the tribunal to issue a
show cause notice of the said application under section 31-A of the Act
to the certificate debtor. Regulation 39(3) further provides that it
would be necessary for the presiding officer of the tribunal to consider
1406WP3452.15-Judgment 15/17
the reply, if filed by the defendant, hear both the parties and then pass
an appropriate order. We do not find anything in the rules or the
regulations that would be derogative of the provisions of section 31-A of
the Act. Sub-section (2) of section 31-A of the Act empowers the
tribunal, in its discretion either to issue a certificate for recovery or not
to issue the same. The Rules of 1993 provide for the manner in which
an application under section 31-A could be filed and the manner in
which the registrar and the tribunal should proceed when the same is
filed. The Regulations of Practice, 2003 make it abundantly clear that it
would be necessary for the tribunal to ensure that a notice of the
proceedings under section 31-A of the Act is served on the defendant
and if a reply is filed, it would be necessary to decide the application
after considering the reply and hearing the parties. The registrar of the
tribunal was probably aware about the position of law and hence the
notice of the proceedings filed by the State Bank of India was issued to
the petitioner and the respondent No.5. After the notices were received
back with an endorsement "left", the tribunal, without making any
further efforts to ensure that the service is effected on the petitioner and
the respondent No.5, proceeded to decide the application under section
31-A of the Act without referring to the provisions of rules 9 to 13 of
the Rules of 1993 and regulation 39 of the Regulations of Practice,
2003. Had the tribunal perused the Rules of 1993 and the Regulations
of Practice, 2003, that were brought into force before the impugned
1406WP3452.15-Judgment 16/17
order was passed, the tribunal may not have observed that the service
of notice of the application under section 31-A of the Act was not
necessary. While holding that it would be necessary to serve a notice of
the proceedings under section 31-A of the Act on the defendants, we are
not inclined to accept the submission made on behalf of the State Bank
of India that paragraph 18 of the judgment in the case of Bank of India
v. Shree Satya Corporation (supra) would be a pointer for deciding the
question involved. Paragraph 18 of the said judgment merely carves
out the distinction between the scope of the proceedings under section
19 and section 31-A of the Act and nothing more. The question
whether it would be necessary to serve a notice of an application under
section 31-A of the Act on the defendants did not fall for consideration
before the court in that case. We are also not inclined to accept the
submission made on behalf of the bank that since the application under
section 31-A was filed on 27/11/2002 and rule 9 was amended on
21/01/2003, the provisions of the Rules of 1993 that make a reference
to an application under section 31-A would not apply to the said
application. The unamended provisions of rule 9 provided for the
procedure for filing of 'every' application and 'every' application would
include an application filed under section 31-A of the Act, after section
31-A was inserted in the statute. Since rules 11, 12 and 13 applied to
every application before rule 9 was amended on 21/01/2003, rules 9,
11, 12, and 13 would apply to the applications under section 31-A of
1406WP3452.15-Judgment 17/17
the Act from the date of insertion of section 31-A in the Act, by
amendment.
8. Hence, by answering the question in the affirmative, we
allow this writ petition. The impugned orders are hereby quashed and
set aside. The Debts Recovery Tribunal is directed to decide the
application filed by the State Bank of India after granting an
opportunity to the petitioner and the other defendants of filing a reply
and after hearing them. The petitioner undertakes to appear before the
Debts Recovery Tribunal on 06/07/2017 so that issuance of notice to
the petitioner could be dispensed with. Rule is made absolute in the
aforesaid terms with no order as to costs.
JUDGE JUDGE
KHUNTE
