2004 (8) TMI 747 - HC - Companies Law

Summary

Issues Involved:
1. Jurisdiction of the Debt Recovery Tribunal (DRT) to entertain the application by the respondents.
2. Whether the respondents qualify as "financial institutions" under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (DRT Act).
3. Interpretation of Section 18 of the Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002 (UTI Act, 2002).
4. Necessity of a notification by the Central Government to declare the respondents as financial institutions.

Detailed Analysis:

1. Jurisdiction of the Debt Recovery Tribunal (DRT):
The petitioner challenged the jurisdiction of the DRT to entertain the application filed by the respondents, arguing that the respondents are not "financial institutions" as defined under the DRT Act. The DRT and subsequently the Debt Recovery Appellate Tribunal dismissed this contention, holding that the respondents are indeed financial institutions and thus, the application for recovery of dues is maintainable under Section 19 of the DRT Act.

2. Whether the Respondents Qualify as "Financial Institutions":
The petitioner argued that the respondents do not meet the definition of "financial institutions" under Section 2(h)(i) of the DRT Act. However, the court held that by virtue of Section 18 of the UTI Act, 2002, the respondents are substituted in place of the erstwhile Unit Trust of India (UTI) and thus qualify as financial institutions. The court emphasized that Section 18 operates as an amendment to every Act, rule, regulation, or notification where the words "Unit Trust of India" appear, substituting them with the names of the respondents.

3. Interpretation of Section 18 of the UTI Act, 2002:
The court interpreted Section 18 of the UTI Act, 2002, as a sweeping amendment that automatically substitutes the names of the respondents wherever the Unit Trust of India is mentioned in any Act, rule, regulation, or notification. The court rejected the petitioner's argument that further amendments or notifications were required to effect this substitution. The court held that such an interpretation would render Section 18 nugatory and that the provision was intended to provide a comprehensive amendment across all relevant legislation.

4. Necessity of a Notification by the Central Government:
The petitioner contended that a notification by the Central Government was necessary under Sub-section (2) of Section 4A of the Companies Act, 1956, to declare the respondents as financial institutions. The court dismissed this argument, stating that Sub-section (2) applies only when an institution is not already specified under Sub-section (1) of Section 4A. Since the respondents are successors to the erstwhile UTI, which was already specified under Sub-section (1), no additional notification is required.

Conclusion:
The court concluded that the respondents, as successors to the erstwhile UTI, qualify as financial institutions under the DRT Act and thus, their application for recovery of dues is maintainable before the DRT. The court upheld the orders of the DRT and the Debt Recovery Appellate Tribunal, dismissing the writ petition and affirming the jurisdiction of the DRT to adjudicate the claim. The court also clarified that no further notifications or amendments were necessary to effect the substitution provided by Section 18 of the UTI Act, 2002. Consequently, the petition was dismissed, and the order of the Debt Recovery Appellate Tribunal was upheld.