Bombay High Court
The Tjsb Sahakari Bank Ltd vs Oriental Bank Of Commerce on 10 January, 2018
Bench: S.C. Gupte
Chittewan 1/14 7. SJ 217-05.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
SUMMONS FOR JUDGMENT NO.217 OF 2005
IN
SUMMARY SUIT NO.3501 OF 2004
WITH
NOTICE OF MOTION NO.277 OF 2016
TJSB Sahakari Bank Ltd. ... Plaintiff
Versus
Global Trust Bank Limited, now known
as Oriental Bank of Commerce ... Defendant
.....
Mr. Fredun De Vitre, Senior Counsel a/w Mr. Yashesh V. Pajwani I/b Mr.
Bhupesh V. Samant for the Plaintiff.
Mr. G.N. Salunkhe a/w Mr. Ajit M. Rajgole I/b B.M. Gupta & Associates for
the Defendant.
.....
CORAM : S.C.GUPTE, J.
DATE : 10 JANUARY 2018
P.C. :
. Heard learned Counsel for the parties. The present order disposes
of the notice of motion taken out in the Summary Suit.
2 The subject matter of the suit is a liability which is claimed as due
from the Defendant, who is also a bank, in respect of certain bills of
exchange issued under letters of credit and negotiated with the Plaintiff-
bank. The summons for judgment is opposed by the Defendant-bank. The
Defendant-bank has taken out the present notice of motion praying for
transfer of the proceedings of the suit to the Debts Recovery Tribunal
Chittewan 2/14 7. SJ 217-05.doc
("DRT").
3 This application is on the ground that after coming into force of the
Enforcement of Security Interest And Recovery of Debts Laws
(Amendment) Act, 2012 ("Amending Act") on 15 January 2013, this suit,
which is a suit for recovery of a debt of the Plaintiff-bank, which is a multi-
State co-operative bank covered under the definition of "banks" under the
Recovery of Debts due to Banks and Financial Institution Act, 1993
("Recovery of Debts Act"), cannot be entertained by this Court. It is
submitted that under Section 18 of the Recovery of Debts Act, this Court
has no jurisdiction to entertain or decide any application from a bank for
recovery of debts due to such bank. It is submitted that under Section 31
of that Act, every suit or other proceeding pending before the court
immediately before coming into force of the Amending Act must be
transferred to DRT. It is submitted that the date of coming into force of the
Amending Act ought to be reckoned as the date of establishment of the
Tribunal under the Recovery of Debts Act insofar as debts to be recovered
by multi-State co-operative banks are concerned. It is submitted that on or
from that date, DRT alone can entertain or proceed with any application
for recovery of debts by such banks, under Sections 17 and 18 of the
Recovery of Debts Act.
4 Mr. De Vitre, learned Senior Counsel appearing for the Plaintiff,
opposes the application. Learned Counsel submits that the suit is not
covered under the transfer provisions of Section 31 of the Recovery of
Debts Act. Learned Counsel submits that the present suit cannot be said to
be pending 'immediately before the date of establishment of the Tribunal'
Chittewan 3/14 7. SJ 217-05.doc
under the Recovery of Debts Act. Learned Counsel submits that such
pendency is a prerequisite for application of Section 31 for transfer of the
suit. Learned Counsel submits that apart from Section 31, there is no
inherent power in the court to order transfer of suits for recovery of debts.
Learned Counsel refers in this behalf to a judgement of the Supreme Court
in case of Raghunath Rai Bareja Vs. Punjab National Bank 1. In further
support of his submission, learned Counsel also relies on the prvisios,
respectively appearing under Sections 18 and 31 of the Recovery of Debts
Act. Relying on the objects and reasons of the Amending Act, which brings
multi-State co-operative banks under the definition of 'banks' under the
Recovery of Debts Act, learned Counsel submits that the express object of
the Amending Act was to enable multi-State co-operative banks, such as
the Plaintiff-bank, to continue at their option proceedings availed of by
them on the date of coming into force of the Amending Act.
5 Under the provisions of the Recovery of Debts Act, the Central
Government is required to establish one or more tribunals to be recognized
as Debt Recovery Tribunal ("DRT") to exercise the jurisdiction, powers
and authority conferred on such tribunal by or under that Act. Under
Section 17 of that Act, a tribunal is required to exercise, on and from the
appointed day, the jurisdiction, powers and authority to entertain and
decide applications from banks and financial institutions for recovery of
debts due to such banks and financial institutions. The expressions
"appointed day", "banks" and "debt" are defined under Recovery of Debts
and Bankruptcy Act, 1993 as follows :
1 (2007) 2 Supreme Court Cases 230
Chittewan 4/14 7. SJ 217-05.doc
2. Definitions. - In this Act, unless the context otherwise
requires, -
(a) .............
(b) .............
(c) "appointed day", in relation to a Tribunal or an Appellate
Tribunal, means the date on which such Tribunal is established
under sub-section (1) of Section 3 or, as the case may be, sub-
section (1) of section 8;
(d) "banks" means -
(i) a banking company;
(ii) a corresponding new bank;
(iii) State Bank of India;
(iv) a subsidiary bank' or
(v) a Regional Rural Bank;
(vi) a multi-State co-operative bank:
(e) ..........
(ea) ..........
(f) ..........
(g) "debt" means any liability (including of interest) which is
claimed as due from any person by a bank or a financial institution
or by a consortium of banks or financial institutions during the
course of any business activity undertaken by the bank or the
financial institution or the consortium under any law for the time
being in force, in cash or otherwise, whether secured or unsecured,
or assigned, or whether payable under a decree or order of any
civil Court or any arbitration award or otherwise or under a
mortgage and subsisting on, an legally recoverable on, the date of
the application [and includes any liability towards debt securities
which remains unpaid in full or part after notice of ninety days
served upon the borrower by the debenture trustee or any other
authority in whose favour security interest is created for the benefit
of holders of debt securities or];
The relevant provisions of the Act proving for jurisdiction of DRT,
Chittewan 5/14 7. SJ 217-05.doc
bar of jurisdiction of civil courts and transfer of pending suits are as follows
:
"Sec.17. Jurisdiction, powers and authority of Tribunals -(1) A
Tribunal shall exercise, on and from the appointed day, the
jurisdiction, powers and authority to entertain and decide
applications from the banks and financial institution for recovery of
debts due to sch banks and financial institutions.
[(1-A) Without prejudice to sub-section (1), -
(a) the Tribunal shall exercise, on and from the date to be
appointed by the Central Government, the jurisdiction, powers and
authority to entertain and decide applications under Part III of
Insolvency and Bankruptcy Code, 2016;
(b) the Tribunal shall have circuit sittings in all district
headquarters.]
(2) An Appellate Tribunal shall exercise, on and from the
appointed day, the jurisdiction, powers and authority to entertain
appeals against any order made, or deemed to have been made, by
a Tribunal under this Act.
[(2-A) Without prejudice to sub-section (2), the Appellate
Tribunal shall exercise, on and from the date to be appointed by
the Central Government, the Jurisdiction, powers and authority to
entertain appeals against the order made by the Adjudicating
Authority under Part III of the Insolvency and Bankruptcy Code,
2016.]"
"Sec. 18. Bar of jurisdiction.- On and from the appointed day,
no Court or other authority shall have, or be entitled to exercise,
any jurisdiction, powers or authority (except the Supreme Court,
and High Court exercising jurisdiction under Article 226 and 227
of the Constitution) in relation to the matters specified in section
17:
[Provided that any proceedings in relation to the recovery of
debts due to any multi-State co-operative bank pending before the
date of the commencement of the Enforcement of Security Interest
and Recovery of Debts Laws (Amendment) Act, 2012 under the
Multi-State Co-operative Societies Act, 2002 (39 of 2002) shall be
Chittewan 6/14 7. SJ 217-05.doc
continued and nothing contained in this section shall, after such
commencement, apply to such proceedings.]"
"Sec. 31. Transfer of pending cases.- (1) Every suit or other
proceeding pending before any Court immediately before the date
of establishment of a Tribunal under this Act, being a suit or
proceeding the cause of action wherein it is based is such that it
would have been, if it had arisen after such establishment, within
the jurisdiction of such Tribunal, shall stand transferred on that
date of such Tribunal:
Provided that nothing in this sub-section shall apply to any
appeal pending as aforesaid before any Court:
[Provided further that any recovery proceedings in relation
to the recovery of debts to any multi-State co-operative bank
pending before the date of commencement of the Enforcement of
Security Interest and Recovery of Debts Laws (Amendment) Act,
2012 under the Multi-State Co-operative Societies Act, 2002 (39 of
2002), shall be continued and nothing contained in this section
shall apply to such proceedings.]
(2) Where any suit or other proceeding stands transferred from
any Court to a Tribunal under sub-section (1), -
(a) the Court shall, as soon as may be after such transfer,
forward the records of such suit or other proceeding to the
Tribunal; and
(b) the Tribunal may, on recipe of such records, proceeding to
deal with such suit or other proceeding, so far as may be, in the
same manner as in the case of an application made under section
19 from the stage which was reached before such transfer or from
any earlier stage as the Tribunal may deem fit."
6 It is clear from the forgoing provisions that on and from the date a
tribunal is established under Sub-section (1) of Section 3 of the Recovery of
Debts Act, all applications for recovery of any liability (inclusive of
interest), which is claimed as due from any person by a bank during the
Chittewan 7/14 7. SJ 217-05.doc
course of any business activity undertaken by it, is to be entertained and
decided by DRT alone. Under Section 31 of that Act, every suit or other
proceeding pending before any court immediately before the date of
establishment of DRT, relating to recovery of such liability, is required to
be transferred to DRT. The Recovery of Debts Act was amended by the
Amending Act, whereupon a multi-State co-operative bank was added in
the definition of "banks" under clause (d) of Section 2 of the Recovery of
Debts Act. Simultaneously, the amending Act added two provisos under
Sections 18 and 31 of the Recovery of Debts Act. The effect of these
provisos was to continue any proceeding in relation to recovery of debts
due to any multi-State co-operative bank, filed under the Multi-State Co-
operative Societies Act and pending before the amending Act, before any
forum under that Act notwithstanding the main provisions of Section 18
and 31. In keeping with these provisos and their object, a few other
provisions were also added to Section 19 of the Recovery of Debts Act,
namely, Sub-Sections (1-A) and (1-B), which had the effect of permitting
multi-State co-operative banks to initiate proceedings under the Multi-State
Co-operative Societies Act, 2002 to recover debts, whether due before or
after the amending Act, notwithstanding the Amending Act making the
provisions of Sections 18 and 31 applicable to such multi-State co-operative
banks. The net effect of all these provisions introduced by the amending
Act was to put multi-State co-operative banks on par with other banking
companies as defined under clause -(c) of Section 5 of the Banking
Regulation Act, 1949. As much as these banks, multi-State co-operative
Banks, seeking to recover liabilities due from any person to them and
arising in the course of their business activities, could have recourse to the
Recovery of Debts Act and apply to DRT for such recovery. They, however,
Chittewan 8/14 7. SJ 217-05.doc
had an option to instead choose the remedy provided for recovery of such
liability under the Multi-State Co-operative Societies Act. Under the Multi-
State Co-operative Societies Act, disputes involving a multi-State co-
operative society and its members and touching the constitution,
management or business of such society could be referred to any arbitrator
to be appointed by the Central Government and the provisions of
Arbitration and Conciliation Act, 1996 were made applicable to such
arbitration. Thus, at its option, a multi-State co-operative bank could now
initiate proceedings either under Recovery of Debts Act to recover its debts,
whether due before or after the date of commencement of the Amending
Act, before the DRT or invoke the machinery of the Multi-State Co-
operative Societies Act and go before the arbitrator. (It also had the option
to withdraw any application earlier filed under the provisions of the
Recovery of Debts Act for the purpose of initiating proceedings under the
Multi-State Co-operative Societies Act. Such application, however, had to
be made with the permission of DRT.) So also, any recovery proceeding
already initiated by such multi-State co-operative bank under the Multi-
State Co-operative Societies Act before the Amending Act would continue
notwithstanding the provisions of sub-section (1) of Section 31 of the
Recovery of Debts Act.
7 The present suit being a suit which is pending before the Court on
the date of coming into force of the Amending Act and the suit being a suit
covered under Section 17 of the Recovery of Debts Act, is required to be
transferred to DRT on and from that date. Mr. De Vitre makes two
principal submissions to oppose such transfer. The first submission is that
pendency of the suit must be reckoned as of the date of original
Chittewan 9/14 7. SJ 217-05.doc
establishment of the tribunal under the Recovery of Debts Act and not the
date of coming into force of the Amending Act, which included multi-State
co-operative bank in the definition of "banks" under the Recovery of Debts
Act. Secondly, he submits that, in any event, the suit being a recovery
proceeding filed by a multi-State co-operative bank, in keeping with the
object of the Amending Act, must be continued before this Court
notwithstanding anything contained in sub-section (1) of Section 31 of the
Recovery of Debts Act.
8 As far as the first submission of Mr. De Vitre is concerned, it is clear
that for the purpose of both Sections 18 of Recovery of Debts Act, which
provides for bar of jurisdiction of all other courts and authorities with
respect to the matter specified under Sections 17, and Section 31 of that
Act, which provides for transfer of pending suits or proceedings, the
relevant date for operation is the date of establishment of tribunal under
the Recovery of Debts Act. Whereas Section 31 refers to such date in terms,
i.e. 'the date of establishment of tribunal', Section 18 uses the expression 'on
or from appointed date', the 'appointed date' being defined as the date on
which the tribunal is established under sub-section (1) of Section 3 of the
Act. Insofar as multi-State co-operative banks are concerned, it is quite
obvious that in relation to proceedings for recovery of debts due to them,
the tribunal is established under the Recovery of Debts Act on the date
when the Amending Act comes into force, with effect from which date such
multi-State co-operative banks are included in the definition of 'banks'
under that Act. If Mr. De Vitre is right in his submission that the expression
"pending immediately before the establishment of the tribunal", must relate to
the establishment of the tribunal originally under the Recovery of Debts
Chittewan 10/14 7. SJ 217-05.doc
Act, then neither Section 18 nor Section 31 would make any sense insofar
as multi-State co-operative banks are concerned. Since both Sections,
Sections 18 and 31, effectively use the expression 'date of establishment of
the tribunal' so as to have them triggered, the implication of Mr. De Vitre's
argument is that despite inclusion of multi-State co-operative banks in the
definition of 'banks' under the Recovery of Debts Act, Section 18 of that
Act, which provides for bar of jurisdiction of other courts or authorities in
relation to matters specified under Section 17, will not apply for any filing
between the date of the original establishment of DRT and the date of the
Amending Act and even future filings thereafter. That would make scarce
sense and defeat the purpose of the Amending Act. For the purposes of
Section 18 of the Recovery of Debts Act, thus, the 'date of establishment of
the tribunal' must be reckoned as the date of coming into force of the
Amending Act, when the tribunal can be said to be established for
entertaining applications for recovery of debts of multi-State co-operative
banks. The expression 'date of establishment of tribunal' cannot have
different meanings for the purposes of Sections 18 and 31. If it means for
the purposes of Section 18 the date of coming into force of the Amending
Act, it must mean so even for Section 31. Correctly construed, the
amendment implies that on and from the appointed date, i.e. date of
establishment of tribunal under the Recovery of Debts Act insofar as
applications for recovery of debts due to multi-State co-operative banks are
concerned, that is to say, the date of coming into force of the Amending
Act, no court or other authority, shall have jurisdiction, power or authority
(except Supreme Court and High Courts, exercising jurisdiction under
Article 226 and 227 of the Constitution of India) in relation to applications
from multi-State co-operative banks for recovery of debts due to them.
Chittewan 11/14 7. SJ 217-05.doc
This of course is subject to the proviso that if any proceedings in relation to
recovery of debts due to such multi-State co-operative banks are pending
under the Multi-State Co-operative Societies Act before the date of
commencement of the Amending Act, they shall be continued and the
provisions of Section 18 shall have no application to such proceedings. So
also, any suit or other proceedings pending on that date shall stand
transferred as of date to the tribunal established under Recovery of Debts
and Bankruptcy Act, 1993, also subject to the proviso that any recovery
proceedings in relation to debt due to multi-State co-operative bank which
are pending before the date of such commencement, under Multi-State Co-
operative Societies Act, 2002, shall be continued and nothing contained
under Section 31 shall apply to such proceedings.
9 That leaves the second argument of Mr. De Vitre that the scheme of
the Recovery of Debts Act, as amended by the Amending Act, is to allow
the continuation of recovery proceedings initiated by multi-State co-
operative Banks, which were pending as of the date of the Amending Act.
Learned Counsel submits that such recovery proceedings need not be under
the Multi-State Co-operative Societies Act; even proceedings such as the
present suit, which is filed before this Court as a civil Court, are covered
under such recovery proceedings. In the first place, this argument is
plainly contrary to the expression used in the provisio of Section 31. The
proviso requires continuation of recovery proceedings "under the Multi-
State Co-operative Societies Act, 2002". The argument of Mr. De Vitre
principally rests on the objects and reasons of the Amending Act as
mentioned in the Statement of Objects and Reasons of the Bill. Learned
Counsel submits that such objects and reasons provide that the amendment
Chittewan 12/14 7. SJ 217-05.doc
was proposed for providing continuation of any recovery proceedings
pending before the commencement of the Amending Act before any forum
in relation to recovery of any debt due to any multi-State co-operative Bank
in the same manner as if the Amending Act never came into force. In the
first place, if the object as suggested by Mr. De Vitre was not only to
provide for continuation of proceedings under the Multi-State Co-operative
Societies Act, but any recovery proceedings before any forum, such object
is not reflected in the Amending Act, considering particularly the provisio
introduced in Sections 18 and 31 of the Recovery of Debts Act by the
amendment. The Amending Act and the provisos introduced by it are very
clear in that they provide merely for continuation of recovery proceedings
under the Multi-State Co-operative Societies Act notwithstanding the main
provisions of these Sections. Secondly, there is absolutely no ambiguity in
the provisions of Section 31 as it stands after the Amending Act and
accordingly, there is no warrant for referring to the objects and reasons of
the Bill as an external aid for interpretation. Even otherwise, that is to say,
even if one were to refer to the Statement of Objects and Reasons, it is
clear that the object was to permit multi-state co-operative banks to opt to
either initiate proceedings under the Multi-State Co-operative Societies Act,
2002 or under the Recovery of Debts and Bankruptcy Act, 1993 and if the
proceedings are already initiated by such multi-State co-operative bank
under the Multi State Co-operative Societies Act, such proceedings are
required to be continued notwithstanding the transfer provisions of Section
31 of the Recovery of Debts Act introduced by the Amending Act. The
four clauses which provide for matters for which the Amending Act
provided, are as follows :
Chittewan 13/14 7. SJ 217-05.doc
(a) to include the multi-State co-operative banks in the definition
of 'bank' under clause (d) of section 2 of the Act;
(b) to permit the multi-State co-operative banks, with respect to
debts due before or after the commencement of the proposed
legislation, to opt either to initiate proceedings under the Multi-
State Co-operative Societies Act, 2002 or to initiate the
proceedings before the Debts Recovery Tribunal;
(c) to enable the banks and financial institution to enter into
settlement or compromise with the borrower and also to empower
the Debts Recovery Tribunal to pass an order acknowledging such
settlement or compromise;
(d) to provide that the recovery proceedings pending before the
commencement of the Enforcement of Security Interest and
Recovery of Debts Laws (Amendment) Act, 2011 in relation to
recovery of debts due to any multi-State co-operative bank shall be
continued in the same manner as the proposed amendments had
not come into force.
Particularly reading clauses (b) and (d) together, as a composite
scheme, they support the object as stated above and not as suggested by
Mr. De Vitre.
10 Mr. De Vitre's reliance on the judgment of the Supreme Court in the
case of Raghunath Rai Bareja (supra) does not take his case any further.
In Raghunath Rai Bareja's case, what the Supreme Court decided was that
the only power of transfer of a pending proceeding concerning recovery of
Chittewan 14/14 7. SJ 217-05.doc
debt owed to a bank was under Section 31 of the Recovery of Debts Act
and the High Court had no jurisdiction under its inherent powers to
transfer any such proceeding. There is no quarrel with this proposition.
The question is whether this proposition can sustain Mr. De Vitre's
objection to transfer in the present case. In the present case, the transfer is
sought not de horse the provisions of Section 31, but under the very
provisions thereof and, as I have noted above, Section 31 clearly applies
to the facts of the present case.
11 The judgments of United Bank of India Vs. Abhijit Tea Co. Pvt.
Ltd2 and Judith Fernandes (Mrs) Vs. Conceicao Antonio Fernandes3,
cited by Mr. De Vitre infact support the Defendant's case here. The law in
the present case having made a specific provision for pending proceedings,
civil courts cannot exercise jurisdiction in proceedings pending before them
and under the specific transfer provision, such proceedings must be
transferred to DRT.
12 The Notice of Motion is, accordingly, made absolute in terms of
prayer clause -(a). The proceedings of the suit shall be transfered to DRT-II
having regard to the place of business of the parties. Considering the fact
that this suit has been pending in this Court since the year 2004, DRT-II is
requested to dispose of the suit as expeditiously as possible and in any
event, within a period of one year from today.
13 No order as to costs.
(S.C. GUPTE, J.)
2 (2000) 7 Supreme Court Cases 357
3 (1996) 10 Supreme Court Cases 401
