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TMI Blog2006 (12) TMI 232X X X X Extracts X X X X X X X X Extracts X X X X ..... from the appellants as "financial institutions". The Debts Recovery Tribunal had therefore undoubted jurisdiction to entertain their claims. On the basis of the materials placed before us there is nothing to suggest that they were acting either as agents of the Central Government or as trustees. Therefore, hold that they have acted in the exercise of power vested in them by the UTI Act, 2002 and in their own right. The High Court was, therefore, right in dismissing the writ petition preferred by the appellants challenging the jurisdiction of the Debts Recovery Tribunal - CIVIL APPEAL NO. 5782 OF 2006 - - - Dated:- 13-12-2006 - B.P. SINGH AND ALTAMAS KABIR, JJ. K.K. Venugopal, Santosh Paul, Raj Mehta, A.K. Rao, Rajeev Sharma and M.J. Paul for the Appellant. Vikas Singh, R.F. Nariman, Rakesh Dwivedi, Lalit Mohan Tyagi, T.S. Doabia, Rajiv Kapur, Ms. Arti Singh, Abhishek Choudhary, Ms. Vimla Sinha, Piyush Vats, Ajit Singh, Adarsh Upadhyay, Gaurav Librehan, Saad Shervani, Sanjay Kapur, T.A. Khan, V.K. Verma and Rajesh Srivastava for the Respondent. ORDER B.P. Singh, J. - Special Leave granted. 2. In this appeal by special leave, the appellant Sout ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her creditors but the Unit Trust of India did not agree with the suggested scheme and instead filed a claim under the DRT Act being O.A. No. 237 of 2003. 5. At this stage, it may be noted that under the UTI (Transfer of Undertaking and Repeal) Act, 2002 (hereinafter referred to as UTI Act, 2002 ), respondent No. 1, the Administrator of specified undertaking of Unit Trust of India, and respondent No. 2 UTI Trustee Company Private Limited, were created. The Unit Trust of India Act, 1963 was repealed and the Board of Trustees referred to in section 10 of the said Act stood dissolved. 6. In O.A. No. 237 of 2003, the appellant filed a Misc. Application on 12-10-2003 praying for dismissal of the O.A. on the ground that respondents 1 and 2 not being "financial institutions" within the meaning of that term in the DRT Act, the Tribunal under the Act had no jurisdiction to entertain and decide the application filed by respondents 1 and 2 for alleged recovery of debts due to them. The Debts Recovery Tribunal by its order of 12-2-2004 dismissed the said application. The appellant challenged the order of the Tribunal before the Debt Recovery Appellate Tribunal but the appeal was also d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Recovery Tribunal since they were suing in the capacity of debenture trustee holders or as agent of the Central Government, and not claiming recovery of amount due to them. The judgment of the Bombay High Court in Krishna Filaments Ltd. v. Industrial Development Bank of India [2004] 118 Comp. Cas. 356 1 was distinguished on facts. 10. Shri K.K. Venugopal, senior advocate, appearing on behalf of the appellant advanced four main submissions before us. Firstly, he submitted that the use of the words "as the case may be" in section 18 of UTI Act, 2002 introduced an element of uncertainty. Section 18 seeks to substitute in the place of the Unit Trust of India, the names of respondents 1 and 2 herein in all Acts, Rules or Regulations etc. This provision does not lay down with any certainty as to which of the two respondents shall be deemed to be a financial institution in a particular Act, Rule or Regulation. The use of the words "as the case may be" could not be included in a definition clause. It is not permissible to say in a definition clause that in each case it must be discovered which of the two names is more appropriate. According to him, the language of section 18 d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o them. 12. Lastly, it was submitted that under section 19B of the Unit Trust of India Act, 1963 special provision for enforcement of claim by the Trust have been made which were quite effective and sufficient. The stringent provisions contained therein were sufficient to protect the interest of the Unit Trust of India. On the other hand, section 19 of the DRT Act provides for another procedure for recovery of debts due to banks and financial institutions. Relying upon the judgment of this Court in Maganlal Chhaganlal (P.) Ltd. v. Municipal Corpn. of Greater Bombay [1974] 2 SCC 402/AIR 1974 SC 2009, he submitted that the two procedures laid down under two different acts for recovery of dues violated Article 14 of the Constitution of India. 13. After submissions were made by the respondents herein, Shri Venugopal did not press the last two submissions noted above. The submission based on section 5(4) of the UTI Act, 2002 was not pressed since it touched the merit of the claim of respondents 1 and 2, which could not be gone into at this stage. Similarly, the submission based on section 19B of the Unit Trust of India Act, 1963 and section 19 of the DRT Act was not pressed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion to be made by the Reserve Bank of India, the Life Insurance Corporation, the State Bank and the subsidiary banks and other institutions. Section 22 of the 1963 Act provided that the capital of the Trust in relation to the first unit scheme shall consist of the initial capital, the unit capital of the said scheme, any reserves created for that scheme etc. Thus when section 3(2) of 2002 Act refers to "the initial capital", it refers to the initial capital created under section 4 of the Unit Trust of India Act, 1963. 16. He submitted that under the UTI Act, 2002 the initial capital has to be refunded by the Central Government. Thereafter sections 4 and 5 of the UTI Act, 2002 Act deal with the Undertaking of the Trust and the Specified Undertaking of the Trust which vest in the Specified Company and the Administrator respectively. The undertaking as well as the specified undertaking represent the assets, schemes etc. which were created under various schemes under the Unit Trust of India Act, 1963. Each of the schedules represent the business and liabilities etc. Under section 3 the initial capital is refunded in the manner prescribed and the other assets are divided in the mann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the same meaning assigned to it in clause ( h ) of section 2 of the DRT Act, 1993. Section 2( h ) of the DRT Act, 1993 defines the "financial institution" to mean a public financial institution within the meaning of section 4A of the Companies Act, 1956 and such other institution as the Central Government may by notification specify. He, therefore, submitted that High Court was right in holding that section 18 effected an amendment in section 4A of the Companies Act with the result that instead of "Unit Trust of India" the "Specified Company" and the "Administrator" stood substituted. They being financial institutions have every right to invoke the provisions of the DRT Act. 19. Before considering the submissions advanced on behalf of the parties, it may be useful to notice some of the provisions of the UTI Act, 2002. The definitions of "financial institution", "Specified Company", the "Specified Undertaking" and "Undertaking" are relevant and they define as follows : "( e ) financial institution shall have the meaning assigned to it in clause ( h ) of section 2 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993; ( h ) specified company means a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Central Government." Sub-section (1) of section 5 must also be noticed which provides : "5. General effect of vesting of undertaking or specified undertaking in specified company or Administrator. (1) The undertaking of the Trust which is transferred to, and which vest in, the specified company or the specified undertaking of the Trust, which is transferred to, and vest in, the Administrator, as the case may be, under section 4, shall be deemed to include all business, assets, rights, powers, authorities and privileges and all properties, movable and immovable, real and personal, corporeal and incorporeal, in possession or reservation, present or contingent of whatever nature and wheresoever situate including lands, buildings, vehicles, cash balances, deposits, foreign currencies, disclosed and undisclosed reserves, reserve fund, special reserve fund, benevolent reserve fund, any other fund, stocks, investments, shares, bonds, debentures, security, management of any industrial concern, loans, advances and guarantees given to industrial concerns, tenancies, leases and book-debts and all other rights and interests arising out of such property as were immediately before the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and figures specified company referred to in the Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002 or Administrator of the specified undertaking of the Unit Trust of India referred to in the Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002 , as the case may be, shall be substituted." 21. It is also necessary to notice the relevant provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. Section 2( g ) defines "debt" as follows: "[( g ) debt means any liability (inclusive 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, and legally recoverable on, the date of the application;]" 22. A financial institution under the said Act is defined by section 2( h ) in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thstanding anything inconsistent (herewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law other than this Act. (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) 2 [,the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986) and the Small Industries Development Bank of India Act, 1989 (39 of 1989)]." 26. Before the High Court the main submission urged on behalf of the appellant was that respondents 1 and 2 herein are not financial institutions within the meaning of DRT Act, 1993. The respondents, however, relied on section 11 of the UTI Act, 2002 and section 2( h )( ii ) of the DRT Act to contend that the aforesaid respondents are financial institutions within the meaning of the term in the DRT Act. The High Court upheld the contention of the respondents. Section 18 of the UTI Act, 2002 in terms provide that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, the "Specified Company" and the "Administrator of the Specified Undertaking" come within the definition of financial institutions as defined under section 2( h ) of the DRT Act. 29. Mr. Venugopal submitted that under section 18 of the UTI Act, 2002 the substitution is of "Specified Company" or "Administrator of the Specified Undertaking", "as the case may be". According to him this brings about an uncertainty and in each case it has to be discovered as to whether one or the other is substituted. According to him section 18 which in a sense is a definition clause should not permit such uncertainty. We find no merit in this submission. By reason of section 18 of the UTI Act, 2002, in place of Unit Trust of India, both respondents 1 and 2 stand substituted. Both are entitled to sue as financial institutions and the question whether they have an enforceable claim must be decided in the facts and circumstances of each ease. There is no uncertainty because the assets possessed by these two identities are clearly enumerated in Schedules I and II of the UTI Act, 2002. We, therefore, do not find that the use of the words "as the case may be" introduces any element of uncertainty. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ature and wheresoever situate including lands, buildings, vehicles, cash balances, deposits, foreign currencies, disclosed and undisclosed reserves, reserve fund, special reserve fund, benevolent reserve fund, any other fund, stocks, investments shares, bonds debentures, security, management of any industrial concern, loans advances and guarantees given to industrial concerns, tenancies, leases and book-debts and all other rights and interests arising out of such property as were immediately before the appointed day in the ownership, possession or power of the Trust in relation to the undertaking or the specified undertaking, as the case may be. . . ." 33. Thus the transfer and vesting is complete. All contracts, deeds, bonds, guarantees, other instruments and working arrangements subsisting immediately before the appointed day cease to be enforceable against the erstwhile Trust but shall be of as full force and effect against or in favour of the Specified Company or the Administrator, as the case may be, in which the undertaking or specified undertaking has vested, and enforceable as fully and effectually as if instead of the Trust, the Specified Company or the Administrator, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r under section 10 of the Act cover almost every power of management and administration. Section 10(1)( b ) in particular authorizes him on the advice of the Board of Advisors to invest, acquire, hold or dispose of securities and to exercise and enforce all powers and rights incidental thereto including protection or realization of such investment etc. Thus, it is a part of the power of management vested in the Administrator to invest as well as to realize such investments. Apparently therefore, if any amount is owing to the specified undertaking, the Administrator has the authority to take all necessary steps to realize any amount due to the specified undertaking. The statute vests this power in the Administrator. It cannot therefore by any stretch of imagination be assumed that the Administrator does not possess the power to make recoveries in course of management of the specified undertaking. The mere fact that the Central Government may give him directions or he may seek instructions from the Central Government of the nature contemplated by sub-section (2) of section 7, does not mean that the power exercised by the Administrator are not the powers vested in him by law. Subject ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer specified by it, possession of all assets and properties representing and relatable to the specified undertaking which are in his possession, custody and control. The Administrator of specified undertaking is, therefore, constituted as a statutory authority under the Act with wide powers and functions vests in him in relation to the specified undertaking which also stand vested in him. When he seeks to recover dues owing to the specified undertaking he exercises his own authority as Administrator and assumes powers which vests in him by law. There is nothing in the Act which may justify the submission that the Specified Company acts as a trustee. It manages and executes the schemes contained in Schedule I of the Act in accordance with the provisions of the Act. 38. Learned counsel for the appellant submitted that under the Banking Regulation Act, 1949 section 6 authorises a banking company to engage in business even as an executor. According to him, an executor cannot recover dues under the provisions of the DRT Act. He placed reliance on the judgment of the Supreme Court in State Bank of India v. Special Secretary Land Land Revenue Reforms Land Land Utilisati ..... X X X X Extracts X X X X X X X X Extracts X X X X
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