2018 (3) TMI 196 - HC - Indian Laws

Recovery of Debt - Whether personal liberty enshrined under Article 21 of the Constitution of India is violated, in view of Article 11 of the International Covenant on Civil and Political Rights, by issuing a SCN for arrest and detention of a judgment debtor, while executing a decree under Section 25(b) of Recovery of Debts Due to Banks and Financial Institutions Act, 1993, read with Regulation 35(1) of Debts Recovery Tribunal- II Chennai Regulations 2015 or not? - Held that - Hon ble Justice in V.R.Krishna Iyer in JOLLY GEORGE VARGHESE s case 1980 (2) TMI 263 - SUPREME COURT observed that No one shall be imprisoned, merely on the ground of inability to fulfil a contractual obligation - there shall be minimal proof of wilful failure on the part of the judgment debtor and a fair procedure be adopted in finding as to whether he has the ability to pay, but have improperly evaded or postponed in doing so, or otherwise, dishonestly committed acts of bad faith. When there is an element of bad faith, dishonesty, wilful evasion or neglect or indifference to pay or some deliberate or reasonable disposition, arrest and detention cannot be said to violate personal liberty enshrined in Article 21 of the Constitution of India - arrest is not by way of punishment, but to recover the arrears of public money. Petitioner is not a honest person but has deliberately acted with supine indeference and evaded payment. Therefore, he is not entitled to any equitable relief. Whether the High Court, while exercising jurisdiction under Article 226 of the Constitution of India can interfere in recovery proceedings, de hors the availability of appeal remedy under the relevant statute or not? - Held that - the writ petitioner has not acted in good faith. Even then, he is entitled to a fair procedure and reasonable opportunity. He was served with notice and filed his counter. He was given ample opportunity to effectively contest his case. As per Section 25 and Regulation 35(1) a certified debtor shall be given opportunity to show cause as to why he shall not be arrested and detained in civil prison. The writ petitioner has not proved that he has acted in good faith. The past conduct and serious allegations in fudging the accounts with an ulterior motive, precludes us from granting the equitable relief, in favour of the petitioner. If at all the petitioner is aggrieved over the return of the appeal for non-compliance of statutory requirement, he would have bonafidely approached this Court with appropriate, independent petition. Seeking a prayer under the pretext of challenging the order, does not reveal any bonafide on the other hand it lacks bonafide. The writ petitioner is not deprived of his personal liberty enshrined under Article 21 of the Constitution of India, as the action taken, is in accordance with due procedure of law. The petitioner lacks bonafides and therefore, not entitled to the benefit of Article 11 of the International Covenant on Civil and Political Rights. Petition dismissed - decided against petitioner.

Summary

Issues Involved:

1. Whether personal liberty under Article 21 of the Constitution of India is violated by issuing a show cause notice for arrest and detention of a judgment debtor.
2. Whether the High Court can interfere in recovery proceedings under Article 226 of the Constitution of India, despite the availability of an appeal remedy under the relevant statute.
3. Whether the International Covenant on Civil and Political Rights (ICCPR) prevails over Municipal Law.
4. Whether the petitioner is an honest judgment debtor and if the Bank has proved his means.

Issue-Wise Detailed Analysis:

1. Violation of Personal Liberty Under Article 21:

The Court examined if the personal liberty enshrined under Article 21 of the Constitution of India is violated by the impugned order, considering Article 11 of the ICCPR. The petitioner argued, referencing the case of Jolly George Varghese and Another vs. The Bank of Cochin, that imprisonment for inability to fulfill a contractual obligation is unjust if the debtor has no means to pay. The Court noted that the Supreme Court in Jolly George Varghese's case emphasized that imprisonment for non-payment of debts is not permissible if the debtor is genuinely indigent and honest. However, the Court concluded that the petitioner had not demonstrated honesty or lack of means, thus the arrest and detention in execution proceedings did not violate Article 21.

2. High Court's Interference in Recovery Proceedings:

The Court discussed whether it could interfere in recovery proceedings at the show cause notice stage, especially when an appeal remedy is available. The petitioner contended that the show cause notice was merely an empty formality and that he would be arrested if he appeared. The respondent argued that the petitioner had an alternative remedy of appeal under the statute. The Court held that it is premature for the High Court to interfere in recovery proceedings when there is no illegality or irregularity causing miscarriage of justice. The Court referenced the Supreme Court's decision in Commissioner of Income Tax and Others vs. Chhabil Dass Agarwal, which emphasized that writ petitions should not be entertained if an effective alternative remedy is available.

3. Prevalence of International Covenants Over Municipal Law:

The Court analyzed whether the International Covenant on Civil and Political Rights prevails over Municipal Law. It referenced the decision in Jolly George Varghese's case and the Kerala High Court's ruling in Xavier vs. Canara Bank Ltd., which stated that international covenants do not automatically become enforceable parts of domestic law unless actual legislation is undertaken. The Court concluded that the ICCPR does not prevail over Municipal Law in this case.

4. Honesty and Means of the Petitioner:

The Court examined if the petitioner was an honest judgment debtor and if the Bank had proved his means. The petitioner claimed to be an honest person without means to pay, but the Court found his conduct questionable. The petitioner had negotiated for a One Time Settlement (OTS) but failed to comply with the terms. The Court noted that the petitioner's claim of no means contradicted his earlier offers for settlement, indicating dishonesty. The Court concluded that the petitioner had not approached the Court with clean hands and was not entitled to any equitable relief.

Conclusion:

The Court dismissed the writ petition, concluding that the petitioner was not deprived of his personal liberty under Article 21, as the action taken was in accordance with due procedure of law. The petitioner lacked bonafides and was not entitled to the benefit of Article 11 of the ICCPR. The petitioner's claim under Article 17 of the ICCPR was also rejected, as there was no intrusion of privacy or attack on his honour and reputation. The Court emphasized that the petitioner had an alternative remedy of appeal and that the High Court's interference was premature. The writ petition was dismissed with no costs, and the connected miscellaneous petition was closed.