Industrial Finance Corporation ... vs Agra Construction Co. Ltd.
1996 Latest Caselaw 754 Del

JUDGMENT

Usha Mehra, J.

(1) M/S Agra Construction Company Ltd., respondent No.1, by this application has raised the question of jurisdiction of this Court in continuing with the proceedings under Section 30 of the Industrial Finance Corporation Actl948 (In short the Ifc Act) particularly after coming into force The Recovery of Debts Due to Banks and Financial Institutions Act,1993 (In short the Debt Recovery Act). The Debt Recovery Act came into force on 24th June,1993. Therefore, Mr. Rajiv Nayyar, counsel for respondent No.1 contended that assumption of jurisdiction by this Court subsequent to coming in force of the Debt Recovery Act would be contrary to the scheme of the said Act. This Court ceases to have jurisdiction to make or pass any order in relation to any property either by way of trying it as a suit or execution.

(2) Relying on the provisions of Sections 2(g), 2(h), 3, 17,18 & 31 of the Debt Recovery Act, applicant respondent No.1 contended that order dated 22nd September, 1995 was passed by this Court without jurisdiction hence cannot be enforced. It is non-est in the eye of law.

(3) No reply to this application has been filed either by the petitioner or by respondents 2 & 3. However, counsel for the non-applicants contended that they would address oral arguments because the point raised is purely legal in nature.

(4) To appreciate the contentions raised at the Bar by counsel for the parties, let us have quick glance at the relevant provisions of the Debt Recovery Act, namely Sections 2(g), 2(h), 3,17,18 & 31 of the Act. These read as under:- "2.Definitions In this Act, unless the context otherwise requires,- (g) "debt" means any liability (inclusive of interest) which is alleged as due from any person by a bank or a financial institution or by a consortium of bank or financial institutions during the course of any business activity undertaken by the bank or the financial institutions or the consortium under any law for the time being in force, in cash or otherwise, whether secured or unsecured, or whether payable under a decree or order of any civil court or otherwise and subsisting on, and legally recoverable on, the date of the application; (h) "financial institutions" means - (i) a public financial institution within the meaning of Section 4A of the Companies Act,1956 (I of 1956); (ii) such other institution as the Central Government may, having regard to its business activity and the area of its operation in India by notification specify; 3. Establishment of Tribunal (1) The Central Government shall, by notification, establish one or more Tribunals, to be known as the Debts Recovery Tribunal, to exercise the jurisdiction, powers and authority conferred on such Tribunal by or under this Act. (2) The Central Government shall also specify, in notification referred to in sub-section (1), the areas within which the Tribunal may exercise jurisdiction for entertaining and deciding the applications filed before it. 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 institutions for recovery of debts due to such banks and financial institutions. (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. 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 a High Court exercising jurisdiction under Article 226 and 227 of the Constitution) in relation to the matrters specified in Section 17. 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 whereon 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 to such Tribunal. Provided that nothing in this sub- section shall apply to any appeal pending as aforesaid before any Court. (2) Where any suit or other-proceedings 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 proceedings to the Tribunal; and (b) the Tribunal may, on receipt of such records, proceed to deal with such suit or other proceedings, 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 or de-novo as the Tribunal may deem fit. Under Section 17, the Tribunal is to exercise the jurisdiction and authority to entertain and decide application from the financial institutions for recovery of debt due. Therefore, the power vested in the Tribunal is to determine as to what amount of debt is due. Debt, as defined under Section 2(g) means any liability which is alleged as due in cash or otherwise, whether secured or unsecured, whether payable under a decree or otherwise. Therefore, in order to attract the power and authority of the Tribunal, the pre-condition is liability to pay. On the basis of that alleged liability the Tribunal would determine what debt is payable by the party in breach. But that is not the case in hand. Petitioner herein filed an application under Section 30 of the I.F.C. Act. The substantive relief in this application is something akin to an application for attachment of property in execution of a decree at a stage posterior to the passing of a decree. This has been so held by the Supreme Court while interpreting Section 31 of the State Financial Corporation Act,1951, which is paramateria same as Section 30 of the Ifc Act. This was so stated in the case of Gujrat State Finance Corporation V. Natson Manufacturing Company Private Ltd. . The language of Section 30 of the Ifc Act is similar to Section 31 of the State Financial Corporations Act,1951. In fact under Section 30 of the Ifc Act seeking sale of properties, there is no mandate that claim be investigated though it may be necessary to specify the figure for determining as to how much security is to be sold. The investigation of the claim does not involve all the contentions that can be raised in a suit. Thus application under Section 30 is neither a suit nor a proceeding as normally understood under the Code of Civil Procedure. The Ifc Act provides a complete Code by itself. In fact this special and speedy procedure has been provided for speedy 'recovery of the State dues. The remedy provided under Section 30 of the Ifc Act is not in derogation to the Debt Recovery Act. The remedy under Section 30 is not the sole and exclusive remedy. It is an additional remedy and this has been made so clear by the Legislature itself by inserting Sub-section (2) of Section 34 of the Debt Recovery Act which reads as under:- "Section 34. Act to have over-riding effect. - (1) x x x x (2) The provisions of this Act or the rules made thereunder shall be in addition to, and not in derogation of, the Industrial Finance Corporation Act,1948 (15 of 1948),the State Financial Corporations Act,1951 (63 of 1951), the Unit Trust of India Act,1963 (52 of 1963), the Industrial Reconstruction Bank of India Act,1984 (62 of 1984) and the Sick Industrial Companies (Special Provisions) Act,1985 (1 of 1986). Sub-Section (2) of Section 34 makes it clear that the provisions of Debt Recovery Act are in addition to the Ifc Act,1948 and not in derogation thereof. .In fact in the case of Dhirajlal Jasmatbhai V. Virdiya V. Gujrat State Financial Corporation , it was observed while interpreting Section 29 to 31 and 32-A of the State Finance Corporation Act, that Parliament wanted special financial institutions to be set up for giving financial accommodation to industrial concerns and at the same time confer special rights of recovery in some cases even without any adjudication by judicial authorities. The power to proceed under Section 30 of the Ifc Act is an alternative power. The very opening words of Section 30 of the Ifc Act show that special provisions are made for the enforcement of the claim by the Corporation. Section 30(1) of the Ifc Act which is reproduced as under will show as to what is the precise nature of application under Section 30 of the Ifc Act.: "Section 30. Special provisions for enforcement of claims by Corporation (1) Where an industrial concern, in breach of any agreement, makes any default in repayment of any loan or advance or any instalment thereof or in meeting its obligations in relation to the guarantee given by the Corporation or otherwise fails to comply with the terms of its agreement with the Corporation or where the Corporation requires an industrial concern to make immediate repayment of any loan or advance under Section 29 and the industrial concern fails to make such repayment, then, without prejudice to the provisions of Section 28 of this Act and of Section 69 of the Transfer of Property Act,1882 (4 of 1882), any office of the Corporation generally or especially authorised by the Board in this behalf may apply to the Court for one or more of the following reliefs, namely:- (a) for an order for the sale of the property pledged, mortgaged, hypo- the cated or assigned to the Corporation as Security for the loan or advance; or (b) for transferring the management of the industrial concern to the Corporation; or (c) for an ad interim injunction where there is apprehension of the machinery or the equipment being removed from the premises of the industrial concern without the permission of the Board."

(5) Bare reading of the provisions of Sub- section (1) of Section 30 of the Ifc Act shows that it is not in the nature of a plaint or an application. Reliefs claimed are the sale of mortgaged property, transfer of the management of the industrial concern or restraining the industrial concern from transferring or removing its plant etc. An application for such a relief in the words of Justice Desai of the Supreme Court (as his Lordship then was) in the case of Gujrat State Financial Corporation (Supra) is certainly not a plaint in a suit for recovery of mortgage money by sale of mortgaged property. It would be appropriate to say that on an analogy of application under Section 31(1) of the State Financial Corporation Act it is something akin to a suit by mortgage to recover mortgage money by sale of mortgaged property. In an application under Section 30 the Corporation cannot pray for a decree for its outstanding dues. Therefore, such an application is not in the nature of a suit. In the words of D.A.Desai, J. in the case of Gujrat State Financial Corporation (Supra): "THE Claim of the Corporation is not a money claim to be investigated though it may become necessary to specify the figure for the purpose of determining how much of the security should be sold. But the investigation of the claim does not involve all the contentions that can be raised in a suit. The claim of the Corporation is that there is a breach of agreement or default in making repayment of loan or advance or instalment and, therefore, the mortgaged property be sold."

(6) In fact the Court under Section 30 is not exercising its normal powers. In the words of Apex Court "Court is exercising a special power under a special statute in a somewhat summary manner." It is a limited power that has been granted under Section 30 of the Ifc Act itself. In almost similar circumstances, the Gujrat High Court in the case of Bharat Chemical Works V. Gujrat State Financial Corporation rejected the contention-of appellant in that case he pleaded that sub-section (4) of.Gujrat Public Money (Recovery of Dues) Act,1979 bars a suit and the grant of injunction by Civil Court in respect of such a loan. In that case application under Section 31 of the Gujrat State Financial Corporation Act was still pending against the appellant. In the meantime, Gujrat Public Moneys (Recovery of Dues) Act,1979 came into force. Section 3(1) of the Recovery of Dues Act,1979 envisaged that the Financial Corporation was to send a recovery certificate for the sum due against the Industrial concern to the Collector. Sub-section (4) bars the suit and the grant of injunction by the Civil Court in respect of such a loan. Section 7 of the Recovery of Dues Act,1979 operated to abet pending civil suits without prejudice to the rights of the Corporation to recover the amount in accordance with the Recovery of Dues Act,1979 or under any other law in force. Contention of that appellant was that since the application under Section 31 of the State Financial Corporation Act was in the nature of the suit it abouted under Section 7 of the the Recovery of Dues Act,1979. Gujrat High Court following the decision of Gujrat State Financial Corporations (Supra) held that the application was neither a suit nor in the nature of suit and thus did not abet. Further argument of the appellant that by implication remedy under Section 31 stood barred because of Recovery of Dues Act,1979 was also rejected. It was observed that the word "may" has been used in both the Acts which means that the Corporation could elect anyone of these two remedies. In fact the Court went to the extent of saying that the power may be exercised in either or even in both of the two modes in certain cases. Therefore, relying on the observations of the Gujrat High Court quoted above it can safely be said that Section 18 of the Debt Recovery Act does not bar the jurisdiction of this Court with regard to a petition under Section 30 of the Ifc Act because these proceedings are neither a suit nor in the nature of a suit, therefore, not barred either on account of Section 17 or Section 18 of the Debt Recovery Act. Hence the question of transfer under Section 31 of the Debt Recovery Act does not arise. Since I am of the view that an application under Section 30 of the Ifc Act is neither suit nor in the nature of a suit or proceeding arising out of a suit, hence the question of its transfer does not arise. Since petition under Section 30 of the Ifc Act is not a suit, therefore,, there cannot be any question of investigation into the claims. Hence the application under Section 30 of the Ifc Act is maintainable despite of the coming into force of the Debt Recovery Act. Even otherwise these proceedings' are saved by the legislature itself by inserting Section 34 of the Debt Recovery Act which in no uncertain words has said that the proceedings under Section 30 of the Ifc Act are not derogatory to Debt Recovery Act.

(7) For the reasons stated above, I find no force in this application. The same is accordingly rejected. Directions are given that the sale certificate be now issued forthwith to Mr.V.P. Goel who has already paid the complete bid amount per the order of this Court.