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TMI Blog2016 (2) TMI 528X X X X Extracts X X X X X X X X Extracts X X X X ..... IDDHARTHA SAMAL, ADVOCATE COMMON ORAL JUDGMENT (PER : HONOURABLE MR. JUSTICE ANANT S. DAVE) 1 The petitioners, in both these petitions being guarantors of respondent No.2 company and defaulters to the tune of more than ₹ 75 crores, have filed these petitions and as common question of law about exercise of powers under Article 226 of the Constitution of India visavis availability of alternative remedy under the statute arise for consideration, with consent of learned counsel for the parties, both the petitions are taken up for hearing. 2 In Special Civil Application No.13529 of 2015, the petitioners / original defendant Nos.2 and 3 are the directors of respondent No.2 original defendant No.1 M/s. Electrotherm [India] Ltd. and guarantors in the loan transaction entered into by the respondent No.2 company with respondent No.1 Uco Bank on 04.09.2010 for shortterm loan of ₹ 50 Crores. The respondent No.2 company through its authorized director, has signed and executed security documents viz. demand promissory note, letter of waiver, agreement relating to term loan, guarantee agreement executed by the petitioners / original defendant Nos.2 and 3 and und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal application. It was emphasized that in view of decision of the Apex Court in the case of K.S.L. Industries Limited v. Arihant Threads Limited Ors. [AIR 2015 SC 498], SICA, 1985 has primacy over the RDDB Act, 1993 and particularly Section 22 shall prevail over the provisions of the RDDB Act, 1993. 4.1 However, the learned Presiding Officer, DRTI, Ahmedabad allowed Original Application No.125 of 2011 filed by the Uco Bank by determining the debt with costs against the defendant Nos.2 and 3 / petitioners herein, keeping the original application pending against the defendant company i.e. the borrower company during the pendency of reference before the BIFR or any appeal before AAIFR and the injunction order passed by the Tribunal dated 12.09.2011 on the personal immovable properties of the defendant Nos.2 and 3 was ordered to remain in force until the specific attachment order is passed by the Recovery Officer in the recovery proceedings qua such properties and certificate of recovery was to be drawn in accordance with law and to realize the amount from the defendants and compliance report to be submitted. 4.2 Thus, the Tribunal held that there is no bar to adjudicate the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant reliefs, as prayed therein and to take it to a logical end. 6.1 Learned Senior Advocate appearing for the petitioners relied on various provisions of Sections of SICA, 1985, more particularly, Section 22 about suspension of legal proceedings, contracts, etc. and Section 32 about Effect of the Act on other laws, and various other provisions of RDDB Act, 1993 viz. Section 2[a] definition Appellate Tribunal . Section 17. Jurisdiction, powers and authority of Tribunals. Section 18. Bar of jurisdiction. Section 19. Application to the Tribunal. Section 20. Appeal to the Appellate Tribunal. Section 21. Deposit of amount of debt due, on filing appeal. Section 22. Procedure and Powers of the Tribunal and the Appellate Tribunal. Section 24. Limitation. Chapter V. Recovery of Debt Determined by Tribunal. Section. 34. Act to have overriding effect. 6.2 Learned Senior Advocate appearing for the petitioners relied on the following decisions of the Apex Court: [1] In the case of Patheja Bros. Forgings Stamping Anr. vs. ICICI Limited Ors. [(2000)6 SCC 545], in the context of bar under Section 22 of SICA, 1985 for enforcement of any guarantee in respec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Mr. Mihir Thakore wherein the Apex Court extended the bar contained in Section 22(1) of SICA, 1985 to proceedings initiated under Arbitration and Conciliation Act, 1996. [4] In the case of Zenith Steel Tubes Industries Ltd. [(2008)1 SCC 533], the Bench of two Judges of the Apex Court found the issue to be referred to a Larger Bench to resolve the anomaly resulting into different views emerging from two decisions in the case of Paramjeet Singh Patheja [supra], Patheja Steel Tubes Industries Ltd. [supra] and Kailash Nath Agarwal [supra]. It is, therefore, submitted that since the case was resolved amicably, the above issue is not yet finally resolved by the Apex Court. [5] In the case of KSL Industries Limited vs. Arihant Threads Limited Ors. [(2008)9 SCC 763], the issue before the Apex Court was about two statues employing nonobstante clause having overriding effect viz. Sections 22 and 32 of SICA, 1985 visavis nonobstante clause in Section 34 [1] and [2] of RDDB Act, 1993, as the said act is later in point of time. However, in view of difference of opinions with regard to interpretation of Section 34 of RDDB Act, 1993 about overriding effect, the matter was referred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rerogative writs under Article 226 of the Constitution of India and held that it is plenary in nature and not limited by any other provisions of Constitution and availability of effective and efficacious remedy, jurisdiction of High Court in writ petition would not be affected especially when the petition is preferred against authority, who had no jurisdiction or had purported to usurp jurisdiction without any legal foundation. The challenge in the above case before the High Court was issuance of suo motu notice to the appellant under Section 56(4) of Trade and Merchandise Marks Act, 1958 for cancellation of certificate of registration. 6.3 Lastly it is submitted that in Appeal No.94 of 2015 before AAIFR, New Delhi, it is referred in the order dated 06.01.2016 that ₹ 16.69 [approx.] crores will continue to remain appropriated subject to final order of BIFR and ₹ 11.27 [approx.] crores, which has been withheld and not yet appropriated will be kept separately in an `interest bearing no lien account' by the appellant and ₹ 2 crores and odd was recovered by the respondent banks. 7 Mr. Pranav Desai and Mr. Siddhartha Samal appearing for respondents, Uco Bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bility of statutory alternative remedy, this court will relegate the petitioners to approach the appellate authority under Section 20 of the RDDB Act. 8 Having given our thoughtful consideration to the arguments canvassed by the learned counsels for the parties, perusal of record of the case, including the impugned judgment of DRT, Ahmedabad and case laws relied on by learned counsels for respective parties in support of their arguments, it is profitable to reproduce certain relevant provisions of RDDB Act, 1993 for the sake of convenience and considering the preliminary objection with regard to availability of statutory, alternative and efficacious remedy visavis exercise of jurisdiction under Article 226 of the Constitution of India. 2[a] `Appellate Tribunal' means an Appellate Tribunal established under subsection (1) of Section 8; 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 e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Appellate Tribunal may, after giving the parties to the appeal, an opportunity of being heard, pass such orders thereon as it thinks fit, confirming, modifying or setting aside the order appealed against. (5) The Appellate Tribunal shall send a copy of every order made by it to the parties to the appeal and to the concerned Tribunal. (6) The appeal filed before the Appellate Tribunal under subsection (1) shall be dealt with by it as expeditiously as possible and endeavor shall be made by it to dispose of the appeal finally within six months from the date of receipt of the appeal. 21. Deposit of amount of debt due, on filing appeal Where an appeal is preferred by any person from whom the amount of financial debt is due to a bank or a financial institution or a consortium of banks or financial institutions, such appeal shall not be entertained by the Appellate Tribunal unless such person has deposited with the Appellate Tribunal seventyfive per cent of the amount of debt so due from him as determined by the Tribunal under section 19: PROVIDED that the Appellate Tribunal may, for reasons to be recorded in writing, waive or reduce the amount to be deposited under this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 951), 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]and the Small Industries Development Bank of India Act, 1989 [39 of 1989]. 8.1 Thus, RDDB Act, 1993, amended from time to time, is enacted by the Parliament and statement and objects and reasons read as under: Statement of Objects and Reasons Banks and financial institutions at present experience considerable difficulties in recovering loans and enforcement of securities charged with them. The existing procedure for recovery of debts due to the banks and financial institutions has blocked a significant portion of their funds in unproductive assets, the value of which deteriorates with the passage of time. The Committee on the Financial System headed by Shri M. Narasimham has considered the setting up of Special Tribunals with special powers for adjudication of such matters and speedy recovery as critical to the successful implementation of the financial sector reforms. An urgent need was, therefore, fell to work out a suitable mechanism through which the dues to the bank and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , which is for 45 days from the date on which a copy of the order is received by an aggrieved person and proviso thereto empowers the appellate Tribunal to condone the delay in case if the appeal is preferred after the expiry of the period of 45 days provided sufficient cause is shown by the aggrieved person for not filing it within that period. Under subsection (4) Section 20, the appellate Tribunal is empowered to confirm, modify or setting aside the order appealed against after affording an opportunity of hearing to the parties and such appeal is to be disposed of preferably within 6 months from the date of receipt of appeal. 8.3 That Section 21 provides depositing 75% of the amount of due by an aggrieved person, as determined by the Tribunal under Section 19, but proviso thereto empowers and confers discretion upon the appellate Tribunal for reasons to be recorded in writing, waive or reduce the amount to be deposited under this Section. It is pertinent to note that the validity of the above Section was challenged and that condition being onerous and not capable of complying with and takes away right of an aggrieved person to prefer appeal, is negated by the Apex Court in va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or redressal of the grievance of any aggrieved person. Therefore, in all such cases, the High Court must insist that before availing remedy under Article 226 of the Constitution, a person must exhaust the remedies available under the relevant statute. 44. While expressing the aforesaid view, we are conscious that the powers conferred upon the High Court under Article 226 of the Constitution to issue to any person or authority, including in appropriate cases, any Government, directions, orders or writs including the five prerogative writs for the enforcement of any of the rights conferred by Part III or for any other purpose are very wide and there is no express limitation on exercise of that power but, at the same time we cannot be oblivious of the rules of selfimposed restraint evolved by this Court, which every High Court is bound to keep in view while exercising power under Article 226 of the Constitution. 45. It is true that the rule of exhaustion of alternative remedy is a rule of discretion and not one of compulsion, but it is difficult to fathom any reason why the High Court should entertain a petition filed under Article 226 of the Constitution and pass interim order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the statute to be bypassed, and will leave the party applying to it to seek resort to the machinery so set up. [emphasis supplied] In the above judgment, the Apex Court has relied upon the decision in the case of Titaghur Paper Mills Co. Ltd. v. State of Orissa [1983(2) SCC 433 and the view expressed in the case of Titaghur Paper Mills Co. Ltd. [supra] were echoed in the case of CCE v. Dunlop India Ltd. [(1985)1 SCC 260] observing that Article 226 is not meant to shortcut or circumvent statutory procedures and it is only where statutory remedies are entirely illsuited to meet the demands of extraordinary situations, as for instance where the very vires of the statute is in question or where private or public wrongs are so inextricably mixed up and the prevention of public injury and the vindication of public justice require it that recourse may be had to Article 226 of the Constitution of India. So is not the case in the case noticed by us where the petitioners have defrauded the respondent banks to the tune of ₹ 50 crores and ₹ 25 crores, respectively, exclusive of interest and penalty, etc. 9 We are not impressed with the arguments canvassed by learned ..... X X X X Extracts X X X X X X X X Extracts X X X X
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